VF Corporation, reported a 3 percent decline in the global sales of The North Face during the third quarter ended Sept. 30. The management attributed this mainly to a shift in the timing of orders, indicating that the brand's total sales were actually up by 3 percent on a more normalized basis.
TNF's turnover was off by 10 percent in the Americas for the quarter, although the dip would have been reduced to 1 percent without the timing shift. Its Asian sales returned to growth with a sales increase of 4 percent. VF's guidance for the brand for the full year is unchanged, with sales predicted to grow at the high end of the mid-single-digit range.
TNF's reported sales went up by 17 percent in Europe, including mid-teen growth in its wholesale business and high-teen growth in own retail sales, including a surge of more than 50 percent in digital sales. The brand's sales in Asia-Pacific went up by 5 percent.
TNF saw double-digit growth across all major product categories in Europe, with particularly strong sell-through oforthe urban exploration range. Due to the brand's ongoing momentum in Europe, VF predicts that growth will accelerate further in the fourth quarter and next year.
Globally, TNF's sales went down by 6 percent in the wholesale channel as retailers shifted deliveries of winter products to the fourth quarter.
By contrast, the brand's direct-to-consumer (DTC) revenues rose at a double-digit rate, with an increase in the mid-single digits on a comparable store basis and of more than 20 percent on the digital front.
The Timberland brand's sales were off by 2 percent for the quarter, but again this was due to the shift in the timing of deliveries, which reduced sales by 5 percent for the three months. Timberland's sales dipped by 7 percent in the Americas and by 5 percent in Asia, while they increased by 3 percent in Europe.
The group says its diversification strategy for Timberland is continuing to take hold. The brand's Sensor Flex and Aero Core platforms met strong demand, as well as women's products.
VF is doing much better in the action sports segment with its brand of skate and skate-inspired shoes, Vans. In the third quarter, the branddelivered a 26 percent sales increase in constant currencies.
Vans' performance encouraged VF to raise its forecast again for this full year and to commit an extra $25 million for investments in marketing, digital capacity and innovation in manufacturing, among other things. VF had already committed to an extra spend of $40 million in July. This is meant to fuel more rapid development as VF deploys the five-year plan outlined earlier this year, calling for its sales to expand at a compound annual growth rate of between 4 and 6 percent over the next five years.
The buoyant demand for the Vans brand included a surge of 39 percent in European sales, compared with increases of 22 percent in the Americas and 23 percent in Asia-Pacific, all in constant currencies. The Vans brand's sales were up by 28 percent in the quarter in reported terms.
Thanks to Vans, the revenues of VF's whole outdoor and action sports division jumped by 7.6 percent to $2,502.6 billion, with a rise of 6 percent in constant currencies. The division's operating profit went up by 6.8 percent to $524.5 million, an increase of 11 percent in constant currencies. The VF group raised its forecast for the division's sales to an increase of about 7 percent for the full year, against an earlier projection of about 5 percent.
The entire VF group saw its quarterly sales from continuing operations rise by 5 percent to $3,481.2 billion, up by 4 percent in constant currencies, despite a flat turnover in the U.S. market. The group said the underlying growth rate was probably about 7 percent excluding the shift in the timing of orders. The rise was driven by outdoor and action sports and workwear, while jeans sales slipped by 1 percent in constant currencies.
VF's gross margin from continuing operations was up by 1.0 percentage point to 50.1 percent but the adjusted operating margin was down by 1.4 percentage points to 16.9 percent, with an adverse impact of 0.8 percentage points from exchange rate fluctuations.
The group's net income fell by 23 percent to $386.1 million, due in part to a loss of $624,000 on discontinued operations and expenses of $4.9 million for the acquisition of Williamson Dickie.
Discontinued operations include the Licensed Sports Group business, which was divested in April. Previously, in the summer of 2016, VF sold its contemporary brands business.
Nevertheless, the results and the revised guidance pleased Wall Street, which raised the value of VF's share by 5.5 percent.
The management's upgraded guidance for the full year calls for the group's total revenues to rise by 6 percent to $12.1 billion, up by 5.5 percent in constant currencies, compared with an earlier forecast of a 4.5 percent currency-neutral increase. Both estimates include a contribution of about $200 from Williamson-Dickie.
The gross margin is predicted to reach nearly 50 percent, leading to an adjusted operating margin of about 13.4 percent, down 0.3 percentage points from the previous forecast, mostly due to the Dickies deal.
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