Apparel supplier expanding retail footprint again
The combination of 80 new stores and a 20% increase in e-commerce is expected to drive double digit growth of VF corp.’s business in 2016.
The company, best known for brands such as Timberland, North Face, Lee, Wrangler and Vans, has become a major retailer in its own right and it likes what it sees. It ended last year with 1,520 stores – up from 1,401 the prior year – which combined with a rapidly going e-commerce business, accounted for 34%, or $1.2 billion, of VF’s fourth quarter revenue of $3.4 billion. That compares to 32% in the fourth quarter the prior year. For the year, the direct-to-consumer combination of stores and e-commerce accounted for 27%, or $3.3 billion, of VF’s total revenues of $12.4 billion.
Direct-to-consumer revenues on a reported basis declined 1%, but excluding the effects of currency and a additional week in the prior year’s fiscal calendar revenues increased 11%. And like virtually every retailer, VF said is results were negatively affected by record warm weather and also mentioned a sluggish economic environment as reasons for not growing faster.
Although VF’s direct business is growing, the company’s overall performance last year underwhelmed some investors. Fourth quarter revenues declined 5% to roughly $3.4 billion and net income increased 156% to $312 million, but neither of those numbers are as they appear on the surface. The revenue figure includes the negative effects of a strengthening dollars and an additional week in the prior year reporting period while the reported net income figure doesn’t include asset impairment charges.
When adjusted for the asset impairment charges, net income declined to $409 million from $428 million and earnings per share declined to 95 cents from 98 cents, less than the $1.01 analysts forecast.
“The final quarter of 2015 challenged many companies to leverage core strengths and adapt quickly to a changing landscape,” said Eric Wiseman, VF chairman and CEO. “Our focus, discipline and agility amid a softer consumer environment, record warm weather and a strengthening U.S. dollar have us well positioned to navigate what we believe to be a relatively short-term challenge.
Wiseman said he’s confident the company will be able to deliver continued long-term profitable growth and value creation for our shareholders, an objective it appears is becoming more reliant on direct-to-consumer efforts.
“Our full year 2015 was also affected by many of the same challenges we saw in the fourth quarter, including a tough comparison against 2014’s 53rd week,” Wiseman said. “In fact, when normalized over 2014 and 2015, currency neutral revenue grew 7% and earnings grew 13% annually over this period, in line with our long-term earnings growth target.”