The North Face enjoyed a sales hike of 11 percent for the second quarter of its financial year, until 28 June. The rise was driven by an improvement of 37 percent in its own retail sales, against a low single-digit increase in the brand's wholesale business. Sales are on track to increase by 12 percent for the full year.
Sales for The North Face jumped at a high single-digit rate in Europe, with a rise of nearly 40 percent in own retail sales. The outdoor brand did well in Europe with its running and training products, which are helping the North Face to spread its sales across all seasons. It launched its biggest ever marketing campaign in ten countries, focusing on running and hiking products, which drove significant sell-through rates.
On the other hand, The North Face's turnover declined at a mid-single digit rate in Asia Pacific as the company reacted to inventory issues in the Chinese market by holding back on its deliveries. The company said it refrained from shipping all orders in China. It predicts a return to double-digit sales expansion in the region in the second half of the year. The North Face's managers are encouraged by signs of growing participation, as witnessed by the brand when more than 3,000 participants registered for the TNF 100 Endurance Race.
The outdoor brand's sales were outstanding in the Americas. They expanded at a mid-teen percentage rate, with double-digit growth across all retail channels. Again the company was most enthusiastic about the take-up of its transitional products and mountain athletics apparel, which strengthen the basis for year-round sales. The brand will be supported by a large-scale TV campaign later this year.
The North Face is part of the Outdoor and Action Sports category at VF Corporation, which saw its turnover advance by 16 percent to about $1,279 million for the second quarter, with double-digit growth in the Americas, Europe and Asia Pacific.
Sales for Vans were up by 21 percent for the quarter. They inflated at a high teens rate in Europe, with growth of more than 40 percent in own retail sales and low double-digit growth in wholesaling. The increase was spurred by a range built on the back of a partnership with Star Wars. The action sports footwear brand will open its first European House of Vans beneath Waterloo station in London in August.
The Vans brand's sales soared by more than 40 percent in Asia, including a rise of 60 percent in China, while its turnover in the Americas expanded at a high-teens rate. Vans is on track to achieve growth in the mid-teens range for the full year and to become another brand in the VF group with annual sales of more than $2 billion.
As for the Timberland brand, its sales jumped by 19 percent for the quarter, with increases spread across multiple footwear categories as well as apparel. The sales hike came mostly from Timberland's wholesale business, which generated a sales increase of more than 25 percent, but the brand's own store sales rose amply as well, up by 10 percent for the quarter. Timberland is still projected to lift its sales by about 12 percent for the full year. Further details on the brand's development are to be provided at an Investor Day in September.
The brand's turnover in the Americas saw a hike of nearly 25 percent, with wholesale sales jumping by more than 35 percent in the region while own retail sales were flat. Timberland sales inflated at mid-teen percentage rates in both Europe and Asia Pacific. The European increase was aided by the launch of online sales in the Netherlands and Spain, after France, Germany and Italy in the previous quarter. Apparel already makes up about half of Timberland's business in Asia.
The VF group was eager to point out that smaller brands in the Outdoor and Action Sports category were advancing rapidly as well, with sales increases of more than 20 percent in the quarter for Eastpak as well as Napapijri, Smartwool and Kipling. Operating profit for this category soared by 30 percent to nearly $130.7 million for the quarter. Its operating margin reached 10.3 percent, up by 1.2 percentage point.
The entire VF group's sales climbed by 8 percent to $2,402 million for the quarter. The rise was partly driven by international sales, which were up by 14 percent. This includes increases of 11 percent in Europe and 18 percent in Asia Pacific (including 13 percent in China) in constant currencies.
Another strong factor is the rise of the group's sales in its own retail outlets, up by 18 percent with contributions from nearly all of the brands. By the end of the quarter the group had 1,299 stores, an increase of 41 outlets in the quarter. They made up 26 percent of VF's sales, up from 22 percent for the same quarter last year (although the comparison is a little skewed because this year's own retail numbers include concessions, the stand-alone stores would have accounted for 23 percent of the group's turnover in the second quarter). VF pointed out that it would open 150 stores for the full year, so there would be a much bigger benefit from store openings in the second half, and particularly in the fourth quarter.
The group's gross margin reached 48.4 percent, down by 0.1 percentage point, because a steady improvement in the sales mix was offset by unfavorable currency exchange rates and measures to control inventories, particularly in the group's jeans business. Operating income advanced by 9 percent to nearly $220 million for the quarter, amounting to an operating margin of 9.2 percent, up slightly from 9.1 percent in the second quarter of 2013. VF's net profit jumped by 14 percent to $158 million.
So far this year, the group's sales have climbed by 7 percent to $5,183 million. Outdoor and Action Sports brands delivered a sales rise of 15 percent to $2,854 million, while its operating profit improved by 24 percent to $405.2 million. Operating income for the group reached almost $623 million, up by 11 percent. The group ended the six months with net profit of about $455 million, an increase of 11 percent.
The company said it was on track to reach its full-year targets as well as long-term growth commitments. Sales in the third quarter should rise at about the same rate as the quarter just ended, again driven by the Outdoor and Action Sports category, own retail and international sales. For the full year, the group's sales should rise by 8 percent, gross margin should reach 49 percent and operating margin 15 percent, while earnings per share should reach $3.06 per share.