VF to make 'aggressive' cost cuts, lowers Q4 profit expectations
VF Corp. (NYSE: VF) said it is taking "aggressive cost reduction actions" to withstand a global recessionary environment in 2009 and, for a second time, will be lowering profit expectations for the fourth quarter. VF is parent to various outdoor brands including The North Face, JanSport and Eagle Creek.
The company said that moves to cut costs would result in about $100 million in annual savings starting this year. The cost-cutting moves will result in a charge to fourth-quarter 2008 earnings of approximately $42 million, or $0.30 per share.
Its quarterly revenue is now expected to drop 2 percent from a year ago when it reported sales of $1.96 billion.
VF said in October that it expected revenue to rise between 3 percent and 4 percent, which was down from an initial forecast for 8 percent growth.
VF said it now expects a quarterly profit of $1 to $1.05 per share. Excluding the charge, net income is expected in a range of $1.30 and $1.35 per share.
In October, VF anticipated its quarterly profit would rise between 1 percent and 5 percent, down from a previous projection of 20 percent growth. That would translate to earnings of $1.47 to $1.53 per share.
The company said its revised forecasts were the results of continued tightening of consumer spending.
VF also trimmed its full-year outlooks. The company now expects revenue will climb about 6 percent, off from its prior forecast for 7 percent to 8 percent growth. Earnings are anticipated to be flat, with adjusted earnings likely to rise in a range of 5 percent to 6 percent. It previously predicted earnings per share to rise between about 8 percent and 9 percent.
Last year the company reported net income of $5.22 per share on sales of $7.22 billion. Revenue for 2008 could be about $7.65 billion.
VF predicts it will have about $350 million in cash on its balance sheet at the end of the year and will have no long-term debt to repay until October 2010. There is about $1.3 billion in available credit lines.
Under Armour lowers guidance on Q4, FY '08 results
Under Armour (NYSE: UA) released preliminary fourth-quarter and full-year results lower than previous guidance, saying wholesale orders are down and cancellations are up amid a weak retail environment.
The company said it expects fourth-quarter earnings per share of $0.16 to $0.18 and revenue of $179 million to $180 million. It had not issued previous guidance for the quarter.
For fiscal 2008, Under Armour said it now anticipates earnings per share of $0.76 to $0.78 and revenue of $725 million to $726 million, down from its prior estimate for sales of $750 million to $765 million.
In fiscal 2007, the company reported earnings of $1.05 per share on revenue of $606.6 million.
Citi analyst Kate McShane wrote in a research note that Under Armour's reduced guidance implies heavy order cancellations from sporting goods retailers, which are attempting to keep inventories on track with lower consumer demand.
The revised guidance sent shares of Under Armour down $2.92, or 13 percent, to close at $19.40 on Jan. 14.
Under Armour will report its fourth-quarter and fiscal 2008 results on Jan. 29.
--Compiled by Wendy Geister
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