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VF Corporation’s First-Quarter Earnings Beat

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VF Corporation’s Q1 bottom line

VF Corporation (VFC) reported a 56% YoY (year-over-year) improvement in its first-quarter earnings. The quarter ended on June 30. It reported the results on July 20.

Adjusted diluted earnings per share from continuing operations stood at $0.43, including $0.04 from acquisitions. The company outperformed consensus expectations by ten cents.

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Gross margin improves on favorable product mix

The company’s adjusted gross margin improved by 90 basis points to 50.5% of sales, driven by a shift in its product mix toward higher-margin businesses and a continued focus on fundamentals. Part of the growth was washed away by acquisitions. Excluding acquisitions, the gross margin improved by 170 basis points during the quarter.

Operating margin improves by 200 basis points

VF’s adjusted operating margin increased by 200 basis points to 9% of sales, driven by a higher gross margin and a 110 basis point decline in the selling, general, and administrative rate. The rate’s decline was due mainly to the leverage arising from strong top-line growth.

Guidance revision

Buoyed by strong first-quarter results, VFC’s management revised its fiscal 2019 guidance. Total sales are expected to land between $13.6 billion and $13.7 billion, compared to analysts’ expectation of $13.56 billion. The revised guidance reflects 10% to 11% growth over the previous fiscal year and includes organic growth of more than 5%.

VF’s operating margin is expected to improve by 70 basis points to 13.4% of sales, compared to the previous guidance of 13.2% of sales. Earnings per share are projected to range between $3.52 and $3.57, versus the prior expectation of $3.48 to $3.53, reflecting a 12% to 14% jump over last fiscal year.

Investors who want exposure to VFC can consider the Guggenheim S&P 500 Equal Weight Consumer Discretionary ETF (RCD), which invests 1.5% of its portfolio in VFC.

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