What Drove VFC’s Q2 Outdoor and Action Sports Performance?
A Look at VFC’s outdoor and action sports segment
Outdoor and action sports is VF Corporation’s (VFC) largest segment. This category accounted for 58% of the company’s total revenue in 2Q16 compared to 55.5% in 2Q15. Products sold by VFC in this category include sportswear, action sports apparel and equipment, other high-performance apparel and gear, backpacks, handbags, and more.
The North Face, Vans, Timberland, and Lucy are the company’s major brands in this category. The company competes with Nike (NKE), Lululemon Athletica (LULU), Under Armour (UA), and PVH Corporation (PVH), among others, in several of its product categories.
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Performance of outdoor and action sports in 2Q16
Revenue from the outdoor and action sports segment rose by 1.7% YoY (year-over-year) to $1.4 billion in 2Q16. Growth in the segment’s revenue was driven by a low double-digit rise in direct-to-customer sales, which was partially offset by a low single-digit fall in wholesale sales.
The North Face and Vans brands’ revenue rises of 2% and 4%, respectively, were partially offset by a 7% fall in the Timberland brand’s sales. To read more about the performance of each of these segments, read on to the next section.
Outdoor and action sports segment’s profitability
The outdoor and action sports segment’s operating income fell by 9% to $123 million in 2Q16. Its operating margin fell by 100 basis points to 8.7%, compared to 9.7% in the same period last year.
In comparison, competitors Nike and Lululemon Athletica reported operating margins of 12.4% and 11.6%, respectively, in their last reported quarters. Under Armour, however, reported an operating margin of just 2% in its last reported quarter.
ETF investors seeking to add exposure to VFC can consider the SPDR S&P 500 ETF (SPY), which invests 0.12% of its portfolio in VFC.