VF Corp’s Q1 Income Drops 25% Despite Rise In Action Sports Sales

mike lewis

• April 29 2009
• 320 views
• add a comment

VF Corp announced that its first quarter revenues were down 2 percent on a constant currency basis, net income was off 25 percent, and earnings per share fell 1.01 dollar or 24 percent. One bright note in this otherwise dreary report is that revenues for its Outdoor and Action Sports brands, which include Vans, Reef, and The North Face increased 2 percent on a constant currency basis.

Vans global revenues were flat on a constant currency basis and up three percent domestically for the period. Global revenues for The North Face,  VF’s second largest brand, climbed 14 percent on a constant currency basis, “with healthy growth in the brand’s direct-to-consumer business. Total direct-to-consumer revenues for our Outdoor and Action Sports coalition rose 16%, as we continued to open new stores and expand our e-commerce business. On a reported basis, total revenues of our Outdoor and Action Sports coalition declined 5%.”

In addition to a fall in revenues, VF says the steep drops reflect volatile currency fluctuations and increased pension costs. Citing  volatile market conditions in several key areas, VF lowered its 2009 outlook, and also announced it will discontinue its practice of providing quarterly guidance.s.

VF Corp’s stock is off 9.7 percent this morning on the news.

According to the release:

Global volatility and challenging economic conditions affected the businesses in the first quarter, said the company. VF Corp.’s four largest and most powerful brands, which represent over 60% of VF’s total revenues – Wrangler, The North Face, Lee and Vans – continued to perform well in this environment, with global sales for Wrangler and The North Face up on a constant currency basis during the quarter, and Lee and Vans brand revenues up domestically. These brands continue to gain or hold share in most markets, said the company.

“We are pleased that we met our first quarter targets,” said Eric C. Wiseman, Chairman, President and CEO. “Our balance sheet, liquidity and cash flow remain very strong, inventories are down and we’re on track with our cost reduction initiatives. However, changes in several key markets have led us to reduce our top and bottom line assumptions for the balance of the year.

Operating margins remained strong in the quarter, although down slightly due to the transactional impacts of foreign currency exchange rate fluctuations.