Despite an overall decline in sales and ongoing missteps at its once-trendy Vans division, VF Corp.'s latest financial results bested industry expectations. Buoyed by impressive gains at the North Face and Timberland, it has plans to improve Vans' prospects.
The Denver-based company says sales in its fiscal third quarter slipped 3% to $3.5 billion, down from $3.62 billion in the same period a year ago. On a constant-currency basis, they notched a 3% gain. But as the quarter grew "increasingly difficult," net income fell to $507.9 million, compared to $517.8 million.
The North Face had a banner quarter, with sales climbing 7%, or 13% in constant dollars, reaching $1.32 billion. The company says it had broad-based growth across all channels and regions and that the second phase of the "It's More than a Jacket" marketing campaign is driving growth and momentum. For the full year, VF expects the North Face's sales to be up 14%.
Timberland's sales were flat at $595 million, up 6% in constant dollars. The company credited the brand's "Built for the bold" marketing efforts for increased momentum.
The real trouble, however, is at Vans, where sales fell 13% to $927 million. (In constant currency, the drop is 9%.) And the company now says Vans' sales will fall in the high-single-digit for the full year due to poor execution,
The company says its intent is on solving Vans' woes, focusing on consumers, products, marketplace and operating model. And in December, it recruited a new chief product and merchandising officer and a new chief digital officer.
Problems are even worse at its much-smaller Dickie's brand, where sales sank 16% to $177 million, its third quarter of declines.
The company is exploring "the sale of non-core assets, cutting costs and eliminating non-strategic spend." CEO Steve Rendle stepped down unexpectedly in December following a string of disappointing results.
The results met or exceeded the expectations of Wall Street analysts.
"The firm is going through a tough period," but "we anticipate a strong recovery in earnings over the next two or three years" protected by the strength of its brands, writes David Swartz, an analyst who follows the company for Morningstar.