Dive Brief:
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Apparel and footwear company VF Corporation reported disappointing third quarter results on Monday due to falling department store sales and muted demand: Total Q3 revenue dropped 1% to $3.5 billion, falling short of analyst estimates for $3.63 billion, The Street reports. Q3 earnings, however, rose 13% to $1.20 per share (up 16 percent currency neutral), beating estimates of for $1.15 per share.
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The company noted that its Q3 net loss from discontinued operations was some $5 million, including the final adjustment to the loss on the sale of its Contemporary Brands business (to Israeli company Delta Galil this summer for $120 million) and the operating results for the businesses during the quarter, net of tax.
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Q3 direct-to-consumer revenue, including e-commerce and VF-owned stores, was up 6%, driven by a low double-digit percentage rate increase in the Outdoor & Action Sports business offset by a low-teen decline in Sportswear. E-commerce revenue rose 18%. The company lowered its outlook for the fiscal year, adjusting its revenue increase to 2% (on a currency neutral basis) to about $12.2 billion, down from its previously estimated increase of between 3% and 4%. Reported earnings per share is expected to increase 3% to $3.13 (up 7% currency neutral), down from its earlier outlook for a 5% increase to $3.20 (up 11% currency neutral).
Dive Insight:
VF Corp. CEO Eric Wiseman, who will be replaced by COO Steven Rendle at the start of the new year, noted the high-key sensitivity of the American consumer, considering the hesitancy to spend depending on the weather: The warm fall has hit its outdoor North Face and Timberland brands, which each fell by mid-single-digit percentages.
“With a strong balance sheet, powerful brands, and a growing global presence, we have great confidence in our ability to maintain near-term profitability, yet we’re not satisfied with our third quarter results,” Wiseman also said. “We remain sharply focused on operational improvements and taking advantage of this environment to accelerate strategies to create sustainable, long-term growth opportunities for our brands.”
VF Corp. is also depending on other retailers for much of its sales, and the U.S. is in the midst of a correction when it comes to physical retail, driven by over-growth a few decades ago as well as the rise of e-commerce. Q3 inventories were up 1% year over year, the company said. “We continue to operate in an uneven, global economic environment including especially sluggish retail conditions in the Americas, our largest market,” Wiseman said in a statement.
Its Wrangler and Lee jeans brands each saw sales in the Americas decline by high-single-digit percentages. Its iconic Vans skateboarding apparel and footwear brand was a lone bright spot in the Americas, with sales up by a high-single-digit percentage, the company said.
The company spun off its underperforming contemporary brands business last summer, which included still-promising brands 7 for All Mankind, Splendid, and Ella Moss. But VF still has a strong portfolio and some analysts have seen potential for growth through acquisitions; Lululemon, for example, was floated several years ago as a possible addition to its stable.