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How VFC’s Sales from Imagewear and Sportwear Impacted Its Q2

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Aug. 1 2016, Updated 8:04 a.m. ET

Licensed sports group pushes imagewear sales in 2Q16

Under its imagewear segment, VF Corporation (VFC) sells occupational apparel such as security uniforms. The company also sells licensed athletic apparel for the National Football League and Harley-Davidson (HOG). This segment accounted for about 10% of the company’s total revenue in 2Q16.

During 2Q16, the segment saw a 3% YoY (year-over-year) rise in total revenue to $255 million, as the strong performance of its licensed sports group was partially offset by a fall in its workwear business. Operating income for VFC’s imagewear business rose by 3% to $36 million in 2Q16. Its operating margin stood at 14.3% in 2Q16 compared to 14.2% in 2Q15.

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Sportswear sales under pressure in 2Q16

VFC’s Sportswear segment includes its Nautica and Kipling brands. Under the Nautica brand, the company sells fashion sportswear, sleepwear, and apparel. The Kipling brand’s products include handbags, luggage, backpacks, and accessories.

The Sportswear segment was the worst performer among VFC’s segments in 2Q16. This segment’s revenue fell by 19% to $115 million in 2Q16 as the Nautica brand posted a 20% fall and the Kipling brand posted a fall in the mid-teens. The company’s management blamed the ongoing challenges in the US department store and outlet channels and a general slowdown in demand for the category.

The operating income for VFC’s sportswear segment fell by a whopping 56% to $6 million, while its operating margin fell by 470 basis points to 5.5%.

VFC and other apparel companies such as Coach (COH), Under Armour (UA), Michael Kors (KORS), and PVH Corporation (PVH) are part of the Consumer Discretionary Select Sector SPDR ETF (XLY). XLY invests 2.1% of its portfolio in these companies.

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