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VF (NYSE: $VFC) Reports Second Quarter 2017 Results; Raises Outlook for 2017


GREENSBORO, N.C. - July 24, 2017 ( Newswire) VF Corporation (NYSE: VFC) today reported financial results for its second quarter ended July 1, 2017. All per share amounts are presented on a diluted basis. This release refers to "reported" and "currency neutral" amounts, terms that are described under the heading "Currency Neutral – Excluding the Impact of Foreign Currency." Unless otherwise noted, "reported" and "currency neutral" amounts are the same. This release also refers to "continuing" and "discontinued" operations amounts, which are concepts described under the heading "Discontinued Operations – Licensing Business and Contemporary Brands." Unless otherwise noted, results presented are based on continuing operations.

"VF's second quarter results were solid and consistent with our expectations, driven by strong results from our largest global brands, the company's international and direct-to-consumer platforms, and our growing workwear businesses," said Steve Rendle, President and Chief Executive Officer. "We have really good momentum as we move into the second half of 2017 and are confident in our growth engines, as evidenced by an increase in our full year outlook and our plan to increase our cash returns to shareholders. Based on the strength of the first half of 2017 and our expectations for the second half of the year, we are making growth-focused investments in our largest brands and platforms to generate additional value for our shareholders both in the near and long term."

Currency Neutral – Excluding the Impact of Foreign Currency

This release refers to "reported" amounts in accordance with U.S. generally accepted accounting principles ("GAAP"), which include translation and transactional impacts from foreign currency exchange rates. This release also refers to "currency neutral" amounts, which exclude both the impact of translating foreign currencies into U.S. dollars and the impact of currency rate changes on foreign currency denominated transactions. Reconciliations of GAAP measures to currency neutral amounts are presented in the supplemental financial information included with this release, which identifies and quantifies all excluded items, and provides management's view of why this information is useful to investors.

Discontinued Operations – Licensing Business and Contemporary Brands

On April 28, 2017, the company completed the sale of its Licensed Sports Group (LSG) business, including the Majestic® brand. Accordingly, the company removed the assets and liabilities of LSG at that date and included the operating results of LSG in discontinued operations for all periods presented. In conjunction with the LSG divestiture, VF executed its plan to entirely exit the licensing business and has classified the assets of the JanSport® brand collegiate business as held for sale and included the operating results in discontinued operations for all periods presented.

On August 26, 2016, the company completed the sale of its Contemporary Brands businesses, which included the 7 For All Mankind®, Splendid® and Ella Moss® brands. Accordingly, the company has classified the assets and liabilities of the Contemporary Brands businesses as held for sale as of June 2016 and included the operating results of those businesses in discontinued operations for all periods presented.

The company's net loss from discontinued operations was $5.0 million in the second quarter of 2017, which includes an adjustment to the estimated loss on the sale of LSG recorded in the first quarter of 2017, and the after-tax operating results of the LSG and the JanSport® brand collegiate business during the quarter.

Income Statement Review

  • Revenue increased 2 percent to $2.4 billion (up 3 percent currency neutral), driven by broad-based strength across our international and direct-to-consumer platforms, our Outdoor & Action Sports coalition, and our workwear businesses.
  • Gross margin improved 80 basis points to 49.7 percent on a reported basis, as benefits from pricing, lower product costs and a mix shift toward higher margin businesses were partially offset by changes in foreign currency. Changes in foreign currency negatively affected reported gross margin by 80 basis points during the quarter.
  • Operating income on a reported basis was down 14 percent to $168 million compared to the same period of 2016. Changes in foreign currency negatively affected the operating profit decline by 8 percentage points during the quarter. Operating margin on a reported basis decreased 130 basis points to 7.1 percent. Changes in foreign currency negatively affected reported operating margin by about 70 basis points in the quarter.
  • Earnings per share on a reported basis was down 11 percent to $0.29 compared to $0.32 during the same period last year. Excluding the impact of changes in foreign currency, second quarter earnings per share was in line with last year's second quarter.

Balance Sheet and Cash Flow Highlights

Inventories were up 3 percent compared with the same period of 2016. During the second quarter, the company purchased 14 million of its shares for approximately $760 million at an average price of $54 per share under the company's share repurchase program authorized by VF's Board of Directors in 2017. The company has purchased 22 million of its shares for approximately $1.2 billion thus far in 2017.

2017 Outlook Raised

The following outlook for 2017 has been updated and includes the following:

  • Revenue is now expected to approximate $11.65 billion, up 2 percent on a reported basis (up 3 percent currency neutral). By coalition, revenue for Outdoor & Action Sports is now expected to increase approximately 5 percent (up 6 to 7 percent currency neutral) versus the previous expectation of a mid-single-digit percentage rate increase; revenue for Jeanswear is still expected to approximate 2016 revenue; Imagewear revenue is now expected to increase at a mid-single-digit percentage rate versus the prior expectation of a low single-digit percentage rate increase; and Sportswear is still expected to decline at a high single-digit percentage rate.
  • Direct-to-consumer revenue is now expected to increase between 10 percent and 11 percent versus the previous expectation of a high single-digit percentage rate increase. Digital revenue is now expected to increase more than 25 percent.
  • Gross margin is now expected to reach 49.8 percent, versus the previous expectation of 49.6 percent, a 40 basis point increase over 2016 gross margin, and includes about a 70 basis point negative impact from changes in foreign currency.
  • Operating margin is still expected to approximate 14 percent, consistent with the 2016 adjusted operating margin, including about a 60 basis point negative impact from changes in foreign currency.
  • Earnings per share is now expected to be $2.94, down approximately 1 percent on a reported basis (up at a mid-single-digit percentage rate currency neutral) compared to 2016 adjusted EPS of $2.98. This compares to the company's prior outlook range of $2.89 to $2.94. Relative to our prior outlook, the company's updated 2017 earnings per share outlook includes about a $0.08 per share ($40 million pre-tax) impact from additional investments to drive accelerated growth into 2018 and beyond.
  • Other full year assumptions include an effective tax rate in the low 20 percent range and cash flow from operations of about $1.45 billion.

Dividend Declared

VF's Board of Directors declared a quarterly dividend of $0.42 per share, payable on September 18, 2017 to shareholders of record on September 8, 2017.

Webcast Information

VF will host its 2017 second quarter conference call beginning at approximately 8:30 a.m. Eastern Time today. The conference call will be broadcast live via the internet, accessible at For those unable to listen to the live broadcast, an archived version will be available at the same location.

About VF

VF Corporation (NYSE: VFC) outfits consumers around the world with its diverse portfolio of iconic lifestyle brands, including Vans®, The North Face®, Timberland®, Wrangler® and Lee®. Founded in 1899, VF is one of the world's largest apparel, footwear and accessories companies with socially and environmentally responsible operations spanning numerous geographies, product categories and distribution channels. VF is committed to delivering innovative products to consumers and creating long-term value for its customers and shareholders. For more information, visit

Forward-looking Statements

Certain statements included in this release and attachments are "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements are made based on our expectations and beliefs concerning future events impacting VF and therefore involve several risks and uncertainties. You can identify these statements by the fact that they use words such as "will," "anticipate," "estimate," "expect," "should," and "may" and other words and terms of similar meaning or use of future dates. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. Potential risks and uncertainties that could cause the actual results of operations or financial condition of VF to differ materially from those expressed or implied by forward-looking statements in this release include, but are not limited to: foreign currency fluctuations; the level of consumer demand for apparel, footwear and accessories; disruption to VF's distribution system; VF's reliance on a small number of large customers; the financial strength of VF's customers; fluctuations in the price, availability and quality of raw materials and contracted products; disruption and volatility in the global capital and credit markets; VF's response to changing fashion trends, evolving consumer preferences and changing patterns of consumer behavior, intense competition from online retailers, manufacturing and product innovation; increasing pressure on margins; VF's ability to implement its business strategy; VF's ability to grow its international and direct-to-consumer businesses; VF's and its customers' and vendors' ability to maintain the strength and security of information technology systems; stability of VF's manufacturing facilities and foreign suppliers; continued use by VF's suppliers of ethical business practices; VF's ability to accurately forecast demand for products; continuity of members of VF's management; VF's ability to protect trademarks and other intellectual property rights; possible goodwill and other asset impairment; maintenance by VF's licensees and distributors of the value of VF's brands; changes in tax liabilities; legal, regulatory, political and economic risks; and adverse or unexpected weather conditions. More information on potential factors that could affect VF's financial results is included from time to time in VF's public reports filed with the Securities and Exchange Commission, including VF's Annual Report on Form 10-K and Quarterly Reports on Form 10- Q

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