VF 3Q profit up, cuts 4Q outlook
VF Corp. (NYSE: VFC), parent of The North Face, JanSport and Eagle Creek, said its third-quarter profit rose 13 percent on strength in its outdoor division. It also lowered its fourth-quarter guidance.
For the quarter ended Sept. 27, the company's profit climbed to $233.9 million, or $2.10 per share, from $207.2 million, or $1.84 per share, in the prior-year quarter. Excluding a tax credit, cost-cutting initiatives and other one-time items, the company said it earned $2.03 per share. VF said its cost and inventory control programs helped boost profit.
Revenue jumped 6 percent -- short of the 9 percent growth the company had expected -- to $2.21 billion from $2.07 billion.
The strengthening dollar accounted for about 1 percentage point of the guidance shortfall amid a slowdown in Europe, it said, but international revenue still grew by 22 percent.
VF said its outdoor coalition continued its positive momentum, with revenues up 12 percent in the quarter and strong growth in both domestic and international businesses. Outdoor operating income rose 17 percent, while operating margins expanded by nearly a full percentage point to 20.8 percent.
On a global basis, revenues of The North Face, Vans, Kipling, Reef, Eastpak and Napapijri brands each grew at double-digit rates. Its two largest outdoor brands -- The North Face and Vans -- grew revenues 15 percent and 11 percent in the quarter, respectively.
The company opened 14 stores during the quarter for the Vans, The North Face, Napapijri and Kipling brands.
It anticipates a strong, mid-teen revenue gain in the fourth quarter and healthy increases in operating income and margins for the outdoor division.
For the fourth quarter, the company now expects profit to rise between 1 percent and 5 percent in the quarter, down from a previous projection of 20-percent growth. The new guidance implies profit between $1.47 and $1.53 per share.
VF also now expects revenue to rise between 3 percent and 4 percent, versus its previous goal of 8-percent growth. The outlook implies revenue between $2.02 billion and $2.04 billion.
For the year, VF said it expects earnings per share to rise between about 8 percent and 9 percent with revenue rising between 7 percent and 8 percent.
VF said the turmoil in the global financial markets and uncertainty about the economy has led consumers to cut back on spending. Wholesale customers are being cautious on orders as well, but there has not been material canceling of orders, it added.
Despite the lower guidance, Robert W. Baird & Co. analyst Mitch Kummetz wrote in a note to investors, "We still view VF's glass as half full, as the company still expects to report record fourth-quarter results, which isn't the case for many of its peers." He kept his "Outperform" rating on the stock.
Also, VF's board declared a quarterly cash dividend of $0.59 per share, an increase of $0.01, payable on Dec. 19 to shareholders of record on Dec. 9.
Johnson Outdoors enters interim agreement over debts
Johnson Outdoors (Nasdaq: JOUT) said it has entered into a short-term, interim agreement to modify certain provisions of the company's existing debt agreements between 2005 and 2008.
"Our current debt agreements never could have foreseen the dramatic downturn in the economy and the impact it would have on our industry," said David W. Johnson, CFO of Johnson Outdoors, in a statement. "We are working closely with our lenders on a long-term debt facility that may lead to increased borrowing costs in the future.''
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