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VF Corporation Beats Top-Line Expectations after 7 Weak Quarters

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VFC outperforms consensus in 2Q17

During the second quarter of 2017, VF Corporation (VFC) reported total sales of $2.4 billion. Sales from continuing operations rose 2.0% on a reported basis and 3.0% on a neutral currency basis. The company beat Wall Street’s top-line expectations by $70.0 million. It was the first beat for the company after seven consecutive top-line misses.

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What drove sales?

In the last couple of quarters, VFC’s top line was driven by strong performances from its Vans and North Face brands. Its direct-to-consumer (or DTC) channel and international business continued to show strength and recorded year-over-year growth of 14.0% and 6.0%, respectively, on a neutral currency basis.

Steve Rendle, president and chief executive officer of VF Corporation, said, “VF’s second quarter results were solid and consistent with our expectations, driven by strong results from our largest global brands, the company’s international and direct-to-consumer platforms, and our growing workwear businesses.”

We’ll be looking at the performances of the company’s key revenue segments in the next two parts of this series.

If you’re looking for exposure to VFC, you could consider the VanEck Vectors Morningstar Wide Moat ETF (MOAT), which invests 2.6% of its portfolio in VFC.

How are competitors performing?

Since the retail landscape remains tough, apparel companies continue to face top-line declines and margin contractions. Fashion giant Ralph Lauren (RL) saw sales plummet 16.0% YoY (year-over-year) when it reported its quarterly results in May 2017. The fall was in large part a result of the company’s ongoing initiatives to improve the quality of sales and reduce excess inventory.

Handbag maker Coach (COH) also reported a 3.7% fall in sales during its last reported quarter. Half of the sales decline was due to the company’s strategic decision for door closures and reducing off-price sales.

However, PVH (PVH) reported a 3.7% YoY rise in its first quarter top line. The company performed better than Wall Street expectations as well as its own guidance.

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