VF Corp raises full year profit guidance on strong Q1

VF Corporation, for its first quarter ended June 29, 2019 reported revenue increase of 6 percent or 9 percent in constant dollars to 2.3 billion dollars. Adjusted revenue increased 6 percent or 8 percent in constant dollars to 2.3 billion dollars. Earnings per share were 24 cents on a reported basis, while on an adjusted basis, earnings per share increased 61 percent or 67 percent in constant dollars to 30 cents. Following strong first quarter results, the company has raised its sales and profit guidance for full year 2020.

“Our first quarter represents a new chapter for VF following the spin-off of Kontoor Brands and our relocation to Denver, Colorado," said Steve Rendle, the company’s Chairman, President and CEO in a statement, adding, "As a result of our strong results and increased confidence in the full year, we are raising our fiscal 2020 outlook, including an additional 20 million dollars of investments aimed at accelerating growth and value creation in fiscal year 2020 and beyond."

VF raises full year outlook on strong Q1

The company said, excluding acquisitions and divestitures, revenue increased 9 percent or 11 percent in constant dollars, driven by VF’s largest brands, international and direct-to-consumer platforms, as well as strength from the active and outdoor segments. The company added that first quarter gross margin increased 140 basis points to 54.4 percent, driven by favourable mix and timing of foreign currency transaction hedge gains. On an adjusted basis, gross margin increased 120 basis points to 54.4 percent. Operating income on a reported basis was 133 million dollars, while on an adjusted basis, operating income increased 23 percent to 163 million dollars. Operating margin on a reported basis increased 60 basis points to 5.9 percent and adjusted operating margin increased 100 basis points to 7.2 percent.

For full year fiscal 2020, VF said, revenue is now expected to approximate 11.8 billion dollars, reflecting an increase of approximately 6 percent or 8 percent on a constant dollar basis excluding the impact of acquisitions and divestitures. This compares to the previous expectation of revenue between 11.7 billion dollars and 11.8 billion dollars.

By segment, revenue for Outdoor is now expected to increase approximately 5 percent or 6 percent on a constant dollar basis, excluding the impact of acquisitions compared to the previous expectation of an increase in revenue of approximately 4 percent to 5 percent and 5 percent to 6 percent on a constant dollar basis, excluding the impact of acquisitions. Revenue for Active is now expected to increase approximately 7 percent to 8 percent or 10 percent to 11 percent on a constant dollar basis, excluding the impact of divestitures compared to the previous expectation of an increase in revenue of approximately 6 percent to 7 percent or 9 percent to 10 percent on a constant dollar basis, excluding the impact of divestitures; and, revenue for Work is still expected to increase approximately 3 percent to 5 percent or 4 percent to 6 percent on a constant dollar basis, excluding the impact of divestitures.

The company added that international revenue is still expected to increase approximately 4 percent to 6 percent, or approximately 7 percent to 9 percent on a constant dollar basis. Direct-to-consumer revenue is now expected to increase approximately 10 percent to 12 percent or 11 percent to 13 percent on a constant dollar basis, including 25 percent growth in digital. This compares to the previous expectation of an increase in revenue of approximately 9 percent to 11 percent or 10 percent to 12 percent on a constant dollar basis.

Adjusted gross margin is now expected to be 54.1 percent, which represents an estimated increase of 80 basis points compared to the previous expectation of about 54 percent. Adjusted operating margin is now expected to be 13.8 percent, which represents an estimated increase of approximately 90 basis points. This compares to the previous expectation of an adjusted operating margin of 13.7 percent. Adjusted earnings per share is now expected to be in the range of 3.32 dollars to 3.37 dollars, including an additional 20 million dollars or 4 cents per share, of incremental investment, reflecting growth of approximately 16 percent to 18 percent or 18 percent to 20 percent on a constant dollar basis, excluding acquisitions and divestitures. This compares to the previous expectation of 3.30 dollars to 3.35 dollars, reflecting growth of 15 percent to 17 percent or 17 percent to 19 percent on a constant dollar basis, excluding the impact of acquisitions and divestitures.

VF’s board of directors declared a quarterly dividend of 43 cents per share, payable on September 20, 2019, to shareholders of record on September 10, 2019.

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