VF Corp Q2 gross margin touches all-time high

20 Jul '13

3 min read

VF Corporation reported financial results for its second quarter ended June 29, 2013. All per share amounts are presented on a diluted basis. “Adjusted” amounts refer to non-GAAP measures as described in the “Adjusted Amounts” paragraph at the end of this release.

“Our strong second quarter results demonstrate that VF’s diverse portfolio of brands supported by powerful platforms is a potent engine for growth,” said Eric Wiseman, VF Chairman and Chief Executive Officer. “By staying sharply focused on our strategies – leading in innovation, expanding geographically and connecting more deeply with our consumers – we are winning in the global marketplace and are on track to deliver another record year for VF.”

Highlights:

-Gross margin up 240 basis points to 48.5 percent.

-Adjusted EPS up 14 percent to $1.27 (down 11 percent to $1.24 on a GAAP basis).

-Outdoor & Action Sports revenues rose 6 percent and increased to 50 percent of total VF sales in the quarter.

-International revenues rose 6 percent with increases in every region.

-Direct-to-consumer revenues up 8 percent, with balanced U.S. and international growth.

-Full-year adjusted earnings guidance raised $0.10 per share to $10.85, up 13 percent over 2012 (up 11 percent to $10.78 on a GAAP basis).

Second Quarter 2013 Review

Revenues rose 4 percent to $2.2 billion compared with the same period of 2012, driven by strength in Outdoor & Action Sports, international and direct-to-consumer businesses.

Gross margin improved 240 basis points to 48.5 percent, an all-time high for any quarter in VF’s history. This performance, which includes improvements in nearly every coalition, compares with 46.1 percent in the same period of 2012. The higher gross margin reflects lower year-over-year product costs and the continued shift in our revenue mix toward higher margin businesses.

Operating income on an adjusted basis grew 22 percent to $206 million in the second quarter, compared with $169 million in the same period of 2012. On a GAAP basis, second quarter operating income increased 23 percent to $201 million, compared with $164 million in last year’s same period.

Adjusted operating margin was 9.3 percent, compared with 7.9 percent in the second quarter of 2012. On a GAAP basis, operating margin rose to 9.1 percent from 7.7 percent in last year’s period.

Net income on an adjusted basis grew by 16 percent to $142 million from $123 million in the second quarter of 2012. Adjusted earnings per share – which excludes Timberland acquisition-related items of $0.03 per share in the second quarter – increased 14 percent to $1.27 per share from $1.11 per share during the same period last year.

Last year’s second quarter adjusted earnings per share of $1.11 excluded a $0.32 per share gain from the sale of John Varvatos and $0.03 per share in acquisition-related expenses. Additionally, last year’s second quarter earnings per share included a non-recurring $0.10 per share discrete tax benefit primarily related to the settlement of prior years’ tax audits. On a GAAP basis, second quarter net income was down 11 percent to $138 million or $1.24 per share.

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VF Corporation

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