The North Face 3Q sales growth slows, but parent VF Corp. profits up

A decline in The North Face sales in Europe partly led to slowing revenue growth at parent VF Corp (NYSE: VFC), but positive results from North America, Timberland, and direct-to-consumer sales helped profits rise in the third quarter.
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A decline in The North Face sales in Europe partly led to slowing revenue growth at parent VF Corp (NYSE: VFC), but positive results from North America, Timberland, and direct-to-consumer sales helped profits rise in the third quarter.

VF’s Outdoor & Action Sports group, which includes The North Face, Vans, Timberland, Jansport and SmartWool, increased its revenue 29 percent in the third quarter 2012, but organic growth (not including last year’s Timberland and SmartWool acquisition) came in at only 6 percent.

The North Face’s revenue rose just 5 percent in the third quarter 2012, after a year of consistent double-digit percentage growth and rising 22 percent a year ago. Officials said the slowdown came from Europe where The North Face sales declined, versus modest gains in North America and Asia, along with a 10 percent gain from direct-to-consumer sales. Vans remained strong worldwide, raising its third-quarter 2012 sales 21 percent, with sales staying strong in all regions.

Despite the third-quarter slip from The North Face, officials projected a strong finish to the year for VF Outdoor with full-year 2012 revenue expected to come in on the high end of its 25-30 percent growth prediction. Company officials also “indicated plans to increase its fourth quarter global marketing investment over previously expected levels, particularly in The North Face and Vans brands.”

Companywide, VF Corp reported its third-quarter revenue up 14 percent to $3.1 billion, with organic revenue growth (minus Timberland and SmartWool) up 2 percent. In its other diversified clothing sectors, jeanswear grew 1 percent, imagewear rose 3 percent and contemporary brands fell 17 percent. Direct-to-consumer sales increased 28 percent, companywide, and now account for 18 percent of VF’s total revenue versus 16 percent a year ago.

Quarterly net income was better than expected at $381 million, or $3.42 per diluted share, versus $301 million, or $2.69 per diluted, a year ago. That led officials to raise full-year 2012 profit guidance up 10 cents per share to $9.60 per share. Full-year 2012 revenue projections remained at $10.9 billion

VF officials were upbeat for the fourth quarter, noting it will be the first full year-over-year comparable period with Timberland and SmartWool revenue added in, and projecting continued strong profits.

“Given expectations for stronger revenue growth comparisons across all coalitions, a greater contribution to earnings from its highly profitable and growing direct-to-consumer business, and more normalized product costs, adjusted earnings per share for the fourth quarter should post the strongest comparison of the year, increasing by just over 30 percent," officials said.

Investors on Wall Street were a tad less upbeat, sending VF’s stock price down 5 percent to about $158 a share by mid-afternoon Oct. 22.



--David Clucas

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