What’s Driving VFC’s Revenue in Fiscal 2019?



The first half of fiscal 2019

VFC (VFC) has beaten the analysts’ top-line estimates by 4.1% in the first quarter of fiscal 2019 and by 1.1% in the second quarter. Revenue grew 22.9% and 15.2% YoY in the first and second quarters, respectively, driven by strength in brands like Vans, North Face, and Timberland, acquisitions, and higher international and D2C operations. Even after the exclusion of the impact of acquisitions, revenues for the first and second quarter rose 12% and 6%, respectively.

However, in the second quarter, Timberland reported subdued revenue growth. Also, weakness in the jeanswear business remains a concern. The rise of private brand labels and increasing demand for athleisurewear has negatively impacted the jeans business.

For the first and second quarters of fiscal 2019, international revenue was up 27% and 13%, respectively. The D2C business witnessed growth of 22% and 19%, respectively, for the first and second quarters. Within D2C, the digital business rose 54% and 48% for the first two quarters of fiscal 2019.

Management outlook

For fiscal 2019, VFC’s management has projected net revenue to be at least $13.7 billion. Analysts project the company to deliver revenue of $13.8 million, reflecting growth of 11.4%. Management estimates D2C will deliver revenue growth in the range of 12% to 14%. Digital revenue is expected to witness growth of over 30.0%. International operations are expected to deliver revenue growth between 12.0% and 13.0%.

However, for fiscal 2019, the jeans business is now expected to report a revenue decline of 1% to 2% versus the earlier guidance of unchanged revenue on a YoY basis.

Comparison with other apparel retailers

In the first and second quarters of fiscal 2019, Ralph Lauren’s (RL) revenue numbers outpaced analysts’ estimates. Revenue rose 3.2% YoY in the first quarter and increased 1.6% YoY in the second quarter.

PVH (PVH) beat analysts’ top-line estimate in the first and second quarters of fiscal 2018. On a year-over-year basis, revenue increased 16.4% and 12.7%, respectively.

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