Management Expects VFC’s EPS to Contract in Fiscal 2017



A look at expected fiscal 2017 bottom line

In this article, we’ll discuss the bottom line and margin guidance provided by the management of VF Corporation (VFC). Despite a low single-digit increase in the company’s top line, VFC’s management expects fiscal 2017 earnings per share (or EPS) to decline at a low single-digit rate, primarily due to ongoing currency headwinds. However, on a currency neutral basis, there could be a mid-single-digit percentage rate increase in the company’s EPS.

Wall Street estimates differ slightly from the management’s estimates. Analysts expect flat EPS growth in fiscal 2017.

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Peers also suffer on forex headwinds

Most branded apparel companies are predicted to record a decline in earnings as they grapple with currency and other headwinds. Gap, Inc. (GPS), which expects to post its fiscal year results on February 23, is expected to report a 17% decline in yearly earnings.

Ralph Lauren (RL) is also expected to report a worsening bottom line. Its earning per share are forecast to fall 13% for the fiscal year.

A look at expected margins

VFC’s gross margin is likely to remain flat at 48.6% and would include 70 basis points of negative impact from currency adjustments.

The company’s operating margin is also expected to remain at 2016 levels and stay at 14% of sales.

Investors who want exposure to VFC can consider the Guggenheim S&P 500 Equal Weight Consumer Discretionary ETF (RCD), which invests 1.1% of its portfolio in VFC.

In the next article, we’ll look at VFC’s performance in the stock market, as well as the company’s dividend policy.


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