Eric Wiseman, Chairman and Chief Executive Officer, will comment on the contents of this release in conjunction with a presentation to be made today at the 11th Annual ICR XChange Conference at 8:25 a.m. PST. The presentation will be simultaneously webcast and can be accessed via the VF website at http://www.vfc.com.
Here’s the press release from VF Corp.
VF Corp. (VFC) VF Corporation (NYSE:VFC), a global leader in branded lifestyle apparel, today provided an update on fourth quarter guidance and initial comments regarding 2009. Also announced were aggressive cost reduction actions designed to enable VF to successfully withstand a global recessionary environment in 2009.
2008 will mark VF’s sixth consecutive year of record revenues and another year of strong earnings. However, revenues and earnings in the fourth quarter were affected by the continued deceleration in consumer spending resulting from the global economic slowdown. As a result, fourth quarter revenues are now expected to decline approximately 2% from prior year levels, including a negative 2% impact from foreign currency translation.
Aggressive actions are being taken to address the uncertainty posed by current economic conditions and to protect our future profitability. Cost reduction actions have been initiated that should result in annualized savings of approximately $100 million, beginning in 2009. These actions will result in a charge to fourth quarter 2008 earnings of approximately $42 million, or $.30 per share. Excluding this charge, fourth quarter earnings are expected to range between $1.30 and $1.35 per share, a decline of 7 to 11% from the $1.46 per share reported in the fourth quarter of 2007. On a reported basis, including the charge, fourth quarter earnings should be $1.00 to $1.05 per share. For the full year 2008, revenues are expected to rise about 6%. Including the aforementioned $.30 charge, earnings per share are expected to be about flat compared with 2007 levels. Excluding the charge, earnings per share would be up approximately 5 to 6%.
“VF is well-positioned to weather this difficult environment due to our strong brands and our long history of disciplined financial and balance sheet management,” said Eric Wiseman, Chairman and Chief Executive Officer. “We have the flexibility to respond quickly to changing market conditions to protect our profitability and competitive position. We have built a resilient business model that provides us with tremendous diversity across product categories, channels of distribution and geographies. Most importantly, we have brands and businesses that are healthy and continue to have excellent prospects for long-term success.”
VF’s balance sheet and liquidity remain strong. Cash on the balance sheet at year-end should approximate $350 million and no long-term debt repayments are due until October 2010. In addition, $1.3 billion is available in lines of credit. 2008 should mark another year of strong cash flow from operations of approximately $650 million.
2009 Preliminary Guidance
The current environment presents us with two additional challenges that are not representative of VF’s fundamental business performance: an increase in pension expense levels and the impact of a stronger dollar in foreign currency translation compared with 2008. In 2009 we anticipate an increase in pension expense stemming from the sharp decline in global securities markets in 2008 of approximately $90 million, which is expected to negatively impact 2009 earnings by about $.50 per share. In addition, the impact of foreign currency translation is expected to reduce revenues by 2% from 2008 levels and negatively impact 2009 earnings by approximately $.20 per share.
Despite these challenges, earnings per share in 2009 are expected to be relatively stable compared with 2008 levels. Excluding the approximately $.70 per share combined impact from the above two items, earnings per share in 2009 should exceed our 10 to 11% long-term earnings growth target, as we benefit from the continued change in our mix of business and a lowered cost structure. Revenues in 2009 are expected to be down slightly, with a 2% negative impact from foreign currency translation compared with 2008. In addition, 2009 should be another year of strong cash generation, which is expected to exceed the $650 million currently anticipated for 2008.
Recognizing that the outlook for the global economy remains very uncertain, this guidance assumes no improvement – or further deterioration – in economic conditions. Guidance for both 2008 and 2009 is preliminary and subject to change.
“We are ready to face the challenges of 2009,” said Mr. Wiseman. “VF is known for its performance-driven culture and excellence in execution. We are driving initiatives and investing prudently to support long-term growth, expand margins and generate cash. We’ll approach our retail store opening and capital spending plans cautiously and conservatively while we continue to aggressively manage expenses. At the same time, our dividend remains a high priority for us in providing strong shareholder returns.”
Additional detail and commentary regarding our outlook for 2009 will be provided in our year-end earnings announcement, which will be released at the close of the market on Tuesday, February 10.
Cautionary Statement on Forward-looking Statements
Certain statements included in this release 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 a number of risks and uncertainties. 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 the overall level of consumer spending on apparel; disruption and volatility in the global capital and credit markets; general economic conditions and other factors affecting consumer confidence; VF’s reliance on a small number of large customers; the financial strength of VF’s customers; changing fashion trends and consumer demand; increasing pressure on margins; VF’s ability to implement its growth strategy; VF’s ability to grow its international and direct-to-consumer businesses; VF’s ability to successfully integrate and grow acquisitions; VF’s ability to maintain the strength and security of its 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; maintenance by VF’s licensees and distributors of the value of VF’s brands; fluctuations in the price, availability and quality of raw materials and contracted products; foreign currency fluctuations; and legal, regulatory, political and economic risks in international markets. 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.
Yesterday afternoon Reef reportedly let go of as many as 42 employees from its office in Carlsbad, California. VF Corp Director of Corporate Communications Paul Mason declined to comment, or confirm the exact number of employees that were let go. The news comes just a few weeks after VF Corp announced job cuts across all brands.
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Since Reef will be celebrating its 25th anniversary in 2009, Transworld Business conducted a series of interviews with the some of the people who have had the biggest impact on the brand over the years. The first of these features Dave Gatto, who played an integral role within the company from 2003–2006 before being promoted to President of VF Corp’s Outdoor Americas Coalition.
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VF owns Vans, Reef, Nautica, Wrangler, Jans Sport, Eagle Creek, Lee, Majestic, Red Cap, Lucy, Rustler and other brands as well. They organize their business and report in six segments, which they call Coalitions; Jeanswear, Outdoor, Imagewear, Sportswear, Contemporary Brands, and Other. Read more about their latest quarter ended September 30.
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THE 2008 REEF HAWAIIAN PRO (NOV 12-23) SET TO IGNITE HAWAII’S WINTER SEASON
Carlsbad, CA (November 23, 2008): The Reef Hawaiian Pro, the first stop in the 2008 Vans Triple Crown of Surfing, is set to ignite Hawaii’s competitive season starting Nov. 12-23 at Ali’i Beach located within Oahu’s Haleiwa Beach Park. This 6-star prime WQS event plays a major role for a field of over 260 male and female, international surfers looking to take home vital ratings points for 2009 ASP World Tour qualification, massive bragging rights, and a prize purse worth up to $170,000.
“The Reef Hawaiian Pro sets the tone for the rest of the Triple Crown events to follow,” says Randy Rarick, Director of the Vans Triple Crown. “Both the Men and Women who do well at Haleiwa, put their stamp on the start of the North Shore competitive season and are destined to have their names etched in the record books. This is a ‘make it or break it’ event, particularly for those vying for World Championship Tour qualification and as such, nothing can be discounted. This is the one event that the best drama never stops unfolding!”
With the 2008 ASP World Title already secured by 9 times World Champion Kelly Slater, the Vans Triple Crown of Surfing has become center stage for the remainder of the 2008 professional surfing season. The North Shore of Hawaii will once again act as the ultimate proving ground for athletes looking to capture a major surfing title. The Reef Hawaiian Pro defending men’s champion, Roy Powers, will be guarding his title against North Shore standouts such as Sunny Garcia, Bobby Martinez, Andy Irons, Mick Fanning and local boy, Sean Moody.
On the women’s side, the Reef Hawaiian Pro is the last WQS event and one of only three 6-star WQS events in 2008 making it a crucial event to gain points toward 2009 Women’s ASP World Tour qualification. Defending champion and local North Shore resident Megan Abubo will look to protect her title by fending off female standouts Sofia Mulanovich, Stephenie Gilmore and local Melanie Bartels.
It’s hard to make it out to any major surfing event unless it’s in your backyard, that’s why Reef is putting a lot of emphasis on this year’s Reef Hawaiian Pro through the event webcast. This year’s webcast team consists of surfing personalities Dave Stansfield, Beau Hodge, Reef’s own, Heath ‘Nutty’ Walker and round of 96 wildcard, Brad Gerlach. “I’m excited to be competing in the Reef pro as I’ve had success at Haleiwa in the past,” said Gerr. “I’m also looking forward to analyzing the world’s best surfers for the webcast. Hopefully we will get a pumping west swell!”
About Reef
Reef is one of the premier action sports brands in the world, and exemplifies the cool and casual attitudes of today’s youth driven boardsport market. Our brand is defined by the elite class of athletes that represent Reef products, as well as our core consumers who identify with the Reef brand’s unique blend of surf, sensuality and irreverent sensibility. At the core of the Reef brand are authentic, stylish, and comfort engineered products for guys and girls that have appealed to the millions of Reef consumers around the world since the company originated in 1984. www.reef.com
About VF
VF Corporation is a global leader in lifestyle apparel with a diverse portfolio of jeanswear, outdoor, imagewear, sportswear and contemporary apparel brands. Its principal brands include Wrangler, Lee, Riders, The North Face, Vans, Reef, Eagle Creek, Eastpak, JanSport, Napapijri, Nautica, Kipling, John Varvatos, 7 For All Mankind®, lucy®, Majestic® , Lee Sport and Red Kap.
The Reef Hawaiian Pro micro-site can be found at Reef.com. Go there now to view general event info, photos, videos, athlete profiles and a chance to win a package of event merchandise along with a signed jersey from this year’s champion. Reef will also be broadcasting the event via the Vans Triple Crown of Surfing website. Be sure to watch all the live Reef Hawaiian Pro action unfold from November 12-23, 2008.
Third quarter performance was largely driven by the company’s Outdoor Coalition brands. According to a statement, “The North Face and Vans, grew revenues 15% and 11% in the quarter, respectively.”
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Topher Gaylord, president of VF Corp’s International Outdoor and Action Sports business, based in Lugano, Switzerland, was named president of Seven For All Mankind LLC, VF’s luxury jeans business. His new position becomes effective October 1.
Topher, 39, joined VF in 1993 and has held a variety of positions in sales, marketing and business development for The North Face in the U.S. He relocated to Europe in 2000 as Managing Director for The North Face EMEA, and over the next five years helped to expand The North Face(R) brand into the largest outdoor performance brand in Europe. In 2006 he was promoted to his current position of President - Outdoor and Action Sports, International.
In his new role Topher will report to Mike Egeck, President of VF Corporation’s Contemporary Brands Coalition, and hold responsibility for the Seven For All Mankind business in the Americas. The Seven For All Mankind executive team will report directly to Topher.
“Topher has established strong business development, strategy and leadership skills throughout his career. I have great confidence in his ability to lead the execution of Seven For All Mankind’s growth initiatives as the world’s premiere brand of luxury denim-lifestyle products. He will be a tremendous asset to our organization,” said Mike Egeck.
Topher and his wife, Kim, will be relocating to the Los Angeles area in the near future.
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