VF Reports 2014 Fourth Quarter and Full Year Results
Surfersvillage Global Surf News, 17 February, 2015 - VF Corporation reported financial results for its fourth quarter and full year ended January 3, 2015. Among VFs surf brands, including Reef, Vans has surpassed the $2billion mark.
“We are very pleased to report that Vans® passed the $2 billion dollar mark in 2014 to become VF’s second $2 billion brand along with The North Face®,” said Eric Wiseman, VF brand chairman. “As we end the second year of our five-year plan we’re on track with our 2017 targets.”
Full Press Release Below:
“Our powerful brands and the competitive advantage of our business platforms combined with our relentless focus on operational excellence delivered another year of strong returns for our shareholders,” said Wiseman continued. “Our four largest brands: The North Face®, Vans®, Timberland®, and Wrangler®, along with many of our other brands, were strong performers as we grew our business in every region and channel around the world.
Fourth Quarter 2014 Review
Revenues rose 9 percent to $3.6 billion driven by strong growth in our Outdoor & Action Sports coalition and our international and direct-to-consumer businesses. On a currency neutral basis, revenues increased 11 percent over the 2013 quarter. VF uses a 52/53 week fiscal year and the fourth quarter of 2014 included a 53rd week, which added approximately $100 million in revenue, representing about 3 percentage points of growth.
Gross margin improved 80 basis points to a record 49 percent driven primarily by the continuing shift of our revenue mix toward higher margin businesses.
A $396 million pre-tax, noncash impairment charge ($0.70 per share) was recorded to reduce the carrying value of the goodwill and intangible assets related to our 7 For All Mankind®, Ella Moss® and Splendid® brands.
SG&A as a percent of revenues was up 20 basis points to 32.9 percent.
Operating income on an adjusted basis grew 14 percent to $578 million in the fourth quarter, compared with $508 million in the same period of 2013. On a GAAP basis, fourth quarter operating income was $182 million. Adjusted operating margin improved to 16.2 percent, compared with 15.5 percent in the fourth quarter of 2013. On a GAAP basis, operating margin was 5.1 percent in 2014.
Adjusted earnings per share increased 20 percent to $0.98 per share compared with $0.82 per share during the same period last year. On a GAAP basis, earnings per share were $0.28.
Full Year 2014 Review
Revenues increased 8 percent to a record $12.3 billion, compared with $11.4 billion in 2013, driven by continued strength in our Outdoor & Action Sports coalition, and our international and direct-to-consumer businesses. On a currency neutral basis, revenue increased 8 percent for the year. Inclusion of the 53rd week, as previously noted, added approximately 1 percentage point of growth in 2014.
Gross margin improved 70 basis points to a record 48.8 percent, compared with 48.1 percent in 2013. For the full year, the improvement in gross margin reflects the continued shift in our revenue mix toward higher margin businesses as well as our previously disclosed change in classification of retail concession fees.
SG&A as a percent of full year revenues was up 30 basis points to 33.9 percent. This increase was primarily due to the change in classification of retail concession fees.
Operating income on an adjusted basis grew 11 percent to $1.8 billion, compared with $1.6 billion in 2013. On a GAAP basis, full year operating income was $1.4 billion in 2014. Adjusted operating margin was 14.9 percent in 2014, compared with 14.4 percent in 2013. On a GAAP basis, operating margin was 11.7 percent in 2014.
Adjusted earnings per share increased 14 percent to $3.08 per share compared with $2.71 per share in 2013. On a GAAP basis, full year earnings per share were $2.38.
Fourth quarter revenues for the Outdoor & Action Sports coalition increased 13 percent (up 16 percent currency neutral) to $2.2 billion. Full year Outdoor & Action Sports revenues increased 13 percent in 2014 (up 14 percent currency neutral).
Fourth quarter revenues for The North Face® brand rose 12 percent (up 14 percent currency neutral) including a 30 percent increase in direct-to-consumer sales. By region, The North Face® brand’s revenues were up at a mid-teen percentage rate in the Americas, up more than 25 percent in Asia Pacific and down at a mid single-digit rate in Europe (up at a low single-digit rate currency neutral). For the full year, revenues for The North Face® brand grew 11 percent (up 12 percent currency neutral) to reach $2.3 billion.
Revenues for the Vans® brand in the fourth quarter were up 17 percent (up 20 percent currency neutral) with 30 percent growth in its direct-to-consumer channel and strong wholesale growth. Revenues in the Americas region were up 20 percent in the quarter, up more than 50 percent in the Asia Pacific region and down slightly in Europe due to the changes in foreign currency. On a currency neutral basis, Vans® brand revenues in Europe were up at a high single-digit rate in the quarter. Revenues for the Vans® brand for the full year were up 17 percent, firmly establishing its place as VF’s second $2 billion brand.
Revenues for the Timberland® brand were up 11 percent (up 15 percent currency neutral) in the fourth quarter driven by balanced wholesale and direct-to-consumer gains. In the Americas region, revenues were up nearly 25 percent driven by significant wholesale growth and strong direct-to-consumer sales. In Asia Pacific, fourth quarter revenues were up at a mid single-digit percentage rate (up at a low double-digit rate currency neutral). And in Europe, the Timberland® brand was down at a low single-digit rate (up at a mid single-digit rate currency neutral). Full year Timberland® brand revenues were up 13 percent to $1.8 billion, or an increase of 15 percent on a currency neutral basis.
Fourth quarter operating income for Outdoor & Action Sports rose 21 percent to $432 million. Operating margin increased 130 basis points to 20 percent in the quarter and improved for the full year by 90 basis points to 18.2 percent.
Jeanswear fourth quarter revenues were up 3 percent (up 5 percent currency neutral) to $755 million. As anticipated, revenue comparisons for the Americas region improved with sales up at a low single-digit rate (up mid single-digit currency neutral). In Europe, revenues were up at a low single-digit rate (up 10 percent currency neutral) and in Asia, revenues were up at a mid single-digit rate. In 2014, global Jeanswear revenues were flat at $2.8 billion (up 1 percent currency neutral).
Fourth quarter global revenues for the Wrangler® brand were up 3 percent (up 6 percent currency neutral) driven by strength in the Americas region, including a low-teen increase in its western specialty business and low single-digit growth in the U.S. mass channel. Wrangler® brand revenues in Europe were down 4 percent (up 5 percent currency neutral) and down slightly in Asia Pacific. Full year revenues for the Wrangler® brand increased 2 percent (up 4 percent currency neutral) to reach $1.7 billion.
Global revenues for the Lee® brand in the fourth quarter were up 2 percent (up 5 percent currency neutral) driven by a high single-digit percentage increase in Asia Pacific and a high single-digit percentage increase in Europe (up at a high teen rate currency neutral). This was offset by flat results in the Americas region where the business continues to work through ongoing challenges in the U.S. mid-tier channel. For the full year, global Lee® brand revenues were down 2 percent (down 1 percent currency neutral) at $1.0 billion.
Operating income for Jeanswear in the fourth quarter rose 5 percent to $142 million. Operating margin increased 40 basis points to 18.7 percent in the quarter, and was down 60 basis points for the full year to 18.8 percent due to challenges primarily related to the U.S. business.
Imagewear revenues were up 4 percent (up 5 percent currency neutral) in the fourth quarter to $298 million driven by particular strength in the Licensed Sports Group (LSG) business. For the full year, revenues for the Imagewear coalition were up 4 percent to $1.1 billion including growth in both the Image business driven by new product introductions in our Red Kap® and Bulwark® brands and the LSG business, which had strong demand for National Football League® and Major League Baseball® products.
Fourth quarter operating income for Imagewear was up 8 percent to $48 million, with a 60 basis point improvement in operating margin to 16.2 percent. For the full year, Imagewear operating margin improved 60 basis points to 14.9 percent.
Sportswear fourth quarter revenues increased 4 percent to $215 million. Nautica® brand revenues were flat with a low-teen percentage rate increase in the direct-to-consumer business being offset by a high single-digit decline in wholesale sales. The Kipling® brand’s U.S. business achieved a 25 percent increase in revenues compared with the same period last year. For the year, Sportswear coalition revenues were up 4 percent. Globally, the Kipling® brand grew 13 percent in the fourth quarter, up 18 percent currency neutral.
In the fourth quarter, operating income decreased 10 percent to $32 million with a 220 basis point decline in operating margin to 15 percent. 2014 operating margin for the Sportswear coalition declined by 210 basis points to 12 percent, impacted by a challenging environment in the U.S. department store channel.
Contemporary Brands coalition fourth quarter revenues were down 1 percent (up 1 percent currency neutral), to $107 million, reflecting continuing challenging consumer trends in women’s contemporary apparel and premium denim.
International revenues in the fourth quarter grew 5 percent, or 13 percent on a currency neutral basis. Revenues in Europe were down 1 percent (up 8 percent currency neutral) and in the Asia Pacific region were up 17 percent (up 20 percent currency neutral), including 20 percent growth in China. Revenues in the Americas (non-U.S.) region were up 9 percent (up 19 percent currency neutral). International revenues were 33 percent of total VF fourth quarter sales compared with 34 percent in the same period of 2013. For the full year, international revenues represented 38 percent of total VF sales, the same as in fiscal 2013.