VF's full year outlook raised on strong Q3 performance

VF Corporation’s revenues for its third quarter ended December 29, 2018 were up 8 percent or 10 percent in constant dollars to 3.9 billion dollars. Excluding acquisitions net of divestitures, the company said, revenue increased 7 percent or 9 percent in constant dollars, driven by VF’s largest brands, international and direct-to-consumer platforms, as well as strength from the active, outdoor and work segments.

“VF's third quarter results were fuelled by strong growth in our largest brands and balanced growth across the core dimensions of our portfolio,” said Steve Rendle, Chairman, President and Chief Executive Officer of the company in a statement, adding, “Based on the strength of our third quarter performance and the growth trajectory we see for the remainder of fiscal 2019, we are again increasing our full year outlook, including an additional 45 million dollars of growth-focused investments aimed at accelerating growth and value creation into fiscal year 2020."

Review of VFC’s third quarter results

Gross margin for the quarter increased 40 basis points to 51.9 percent, driven by a mix-shift toward higher margin businesses. On an adjusted basis, gross margin increased 60 basis points to 52.2 percent. Operating income on a reported basis was 592 million dollars and on an adjusted basis, increased 30 percent to 656 million dollars, including a 7 million dollars contribution from acquisitions net of divestitures. Operating margin on a reported basis increased 170 basis points to 15 percent, while adjusted operating margin increased 270 basis points to 16.6 percent. Adjusted operating margin, excluding acquisitions net of divestitures, increased 280 basis points to 16.8 percent.

Earnings per share were 1.16 dollars on a reported basis and on an adjusted basis, earnings per share increased 30 percent or 31 percent in constant dollars to 1.31 dollars, including a 1-percentage point growth contribution from acquisitions net of divestitures.

VFC raises full year outlook on strong Q3

Updating its outlook for the year ahead, the company said, revenue is now expected to be at least 13.8 billion dollars, reflecting an increase of approximately 12 percent or 13 percent in constant dollars compared to the previous expectation of at least 13.7 billion dollars, an 11 percent increase. By segment, revenue for outdoor is now expected to increase 8 percent versus the previous expectation of a 7 percent to 8 percent increase; revenue for active is now expected to increase 16 percent versus the previous expectation of a 14 percent to 15 percent increase; revenue for work is now expected to increase 39 percent versus the previous expectation of a more than 35 percent increase; and, revenue for jeans is now expected to decline 3 percent versus the previous expectation of a 1 percent to 2 percent decline.

International revenue is now expected to increase 10 percent to 11 percent or about 13 percent in constant dollars versus the previous expectation of a 12 percent to 13 percent increase. The company added that direct-to-consumer revenue is now expected to increase 13 percent or 14 percent in constant dollars versus the previous expectation of a 12 percent to 14 percent increase. Digital revenue is still expected to increase more than 30 percent.

Adjusted gross margin is expected to be at least 51 percent, while adjusted operating margin is expected to increase 90 basis points to 13.6 percent. Adjusted earnings per share are now expected to be 3.73 dollars, including an additional 45 million dollars or 9 cents per share, of incremental investment, reflecting an increase of 19 percent or 20 percent in constant dollars). This compares to the previous expectation of 3.65 dollars.

VF’s board of directors has declared a quarterly dividend of 51 cents per share, payable on March 18, 2019, to shareholders of record on March 8, 2019.

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