Retail operations fueling VF growth

VF Corp., the company behind popular brands such as The North Face, Timberland and Wrangler, relied on the strength of its 1,300 unit retail operation to drive sales during the second quarter.

VF revenues for the second quarter ended June 28 increased a respectable 8% to roughly $2.4 billion, but direct-to-consumer revenues grew at a more rapid 18% clip and now account for 26% of the apparel and footwear company’s total revenues. VF said it experienced doubt digit increases in all regions of the world and growth in nearly every VF brand with a retail format. Contributing to the growth was the addition of forty one stores during the quarter which increased the number of VF owned retail stores to 1,299.

The brand responsible for the strongest direct-to-consumer growth was The North Face where sales increased 37% to drive an overall increase of 11%. Direct revenues for the Vans brand increased 27% while total Vans revenues were up 21%. Somewhat countering trends seen with The North Face and Vans was the Timberland brand. Direct sales of Timberland were flat in the Americas and up 10% worldwide, but total Timberland revenues were up 19%.

VF groups its brands into five category and lifestyle oriented business segments it calls “coalitions” described as outdoor and action sports, jeanswear, sportswear, contemporary brands and imagewear. The largest and best performing coalition was the outdoor and actions sports segment where sales grew 16% to $1.28 billion and operating profits grew 30% to $130.6 million. The outdoor and action sports coalition includes brands such as The North Face, Vans and Timberland which had strong direct revenues.

“Our strong second quarter results, led by our outdoor and action sports coalition, put us right in line with our full year outlook and long term growth commitments,” said Eric Wiseman, VF chairman, president and CEO. “Looking toward the second half of 2014, our powerful brands and platforms have us well positioned to continue our momentum and deliver another record year for VF and its shareholders.”

Sales in the VF’s second largest segment, jeanswear, declined 1% to $605 million and were a drag on overall results with operating profits that declined 8% to $100 million.

“(Jeanswear) coalition revenues in the Americas region were down at a low single-digit percentage rate due to ongoing challenges in the U.S. mid-tier department store channel and consumer trends in women’s denim, which primarily impacted the Lee brand,” the company said in a statement. “In Europe, revenues were up at a mid-teen percentage rate and sales in the Asia Pacific region were up at a low single-digit rate.

Looking toward the back half of the year, VF affirmed its full year sales and profit forecasts and said it expects a strong performance from its direct business. Revenues are expected to grow 8% with earning per share forecast to reach $3.06.

“Third quarter revenues are expected to increase at a rate similar to that of the second quarter driven primarily by strength within the outdoor and action sports coalition, our international operations and continued strength in our direct-to-consumer businesses,” the company said. “The strongest growth and profit comparisons of the year are expected in the fourth quarter, when direct-to-consumer represents the most significant contribution of the year.”