Double-digit sales expansion for the outdoor and action sports brands owned by VF Corporation supported the company's 8 percent sales rise for the third quarter in constant currencies. They contributed sales of $2,296.5 million, which was an increase of 5 percent in dollars and 13 percent in constant currencies. Their combined profit inflated by 3 percent to reach $487.9 million.
The North Face (TNF) alone raised its turnover by 11 percent for the quarter in constant currencies, although exchange rate changes diminished the increase to 6 percent. The expansion was spread between wholesale and own retail operations. European sales slumped at a low double-digit rate in reported terms but expanded at a low single-digit rate in constant currencies, with own retail sales advancing by 20 percent and the wholesale business remaining stable.
TNF's sales were up at a low double-digit percentage rate in the Americas, with gains in the Thermoball range and in footwear. In the Asia-Pacific region, the brand generated increases at a high teen rate in constant currencies and at a mid-teen rate in dollars. The company still predicts a double-digit sales increase for TNF before currency impacts for the full year.
Vans contributed sales increases of 10 percent in constant currencies and 2 percent in dollars. The action sports brand's turnover in the Americas was up at a low double-digit percentage rate in constant currencies, compared with expansion at a high teen rate in Asia-Pacific and a mid-single-digit rate in Europe. In dollars, this translated into an increase in the low teens in Asia-Pacific and a decline in the low teens in Europe. The full-year guidance for Vans is unchanged, amounting to a mid-teen percentage rate increase in constant currencies.
For the Timberland brand, sales surged by 21 percent in constant currencies and 11 percent in dollars, with an increase of more than 25 percent in the wholesale business and a low single-digit increase in own retail sales. A sales jump of more than 40 percent in the Americas was attributed to strong performance and a weak comparison with last year, due to a change in the timing of orders. The company predicts expansion at a high-teens rate for the full year in the Americas. Underlying sales were up at a high single-digit rate in Europe and at a low single-digit rate in Asia-Pacific. Timberland's global sales are predicted to increase at a low-teen percentage rate in constant currencies for the full year.
The company pointed out that Smartwool was its fastest-growing brand for the quarter. VF intends to put more effort behind the development of smaller brands, particularly by boosting the international expansion of Kipling and the wholesale business of Lucy, a brand of women's activewear.
VF's outdoor and action sports brands saw their operating income inch up by 3 percent to $488 million, amounting to a decline of 0.6 percentage points in the operating margin to 21.2 percent. Without the currency impact, operating income was up by 16 percent for the quarter.
With flat reported sales in jeanswear, the entire VF group achieved a sales increase of 8 percent in constant currencies for the quarter, while reported sales inflated by 3 percent to $3,612.8 million. International sales for the entire group enjoyed an underlying rise of 9 percent but shrank by 5 percent in dollars. Own retail sales were up 8 percent, but again exchange rate changes shaved 5 percentage points off that increase.
VF's gross profit margin reached 47.9 percent, which was a decline of 0.4 percentage points for the quarter but amounted to 48.9 percent before exchange rate changes, an improvement of 0.6 percentage points. This was due to more favorable product costs and a shift to more profitable businesses, mitigated by unfavorable exchange rates for the euro, the Chinese renminbi, the British pound, the Canadian dollar and the Mexican peso.
The group's operating margin declined by 0.2 percentage points to 17.8 percent, although in constant currencies it improved by 1.0 percentage points to 19.0 percent. The strong dollar had an even stronger impact on earnings per share, which were up by 14 percent in constant currencies but down by 1 percent in reported terms to $1.07.
For the first nine months of this year, the turnover of VF's outdoor and action sports brands was up by 5 percent to nearly $5.3 billion, an increase of 13 percent in constant currencies, and their profit was flat at $883.7 million. The entire group's sales were up by 9 percent in constant currencies and they advanced by 3 percent in dollars to $8,964 million. Operating income for the nine months inched up by 1 percent to $1,263.8 million but VF's reported net income slipped by 1 percent to $919.4 million.
VF's managers estimate that the group's outdoor and action sports brands will deliver a low double-digit rate increase in sales in constant revenues for the full year, amounting to a mid-single digit rate rise in reported terms. The entire group should raise its turnover by 3 percent in dollars and 7.5 percent in constant currencies. Before currency impacts, own retail sales are expected to increase at a low double-digit percentage rate, down from a previously projected mid-teen increase.
VF still projects the gross margin to improve by 0.7 percentage points to 49.5 percent for the full year in constant currencies, but the reported gross margin is predicted to be flat. Earnings per share are still predicted to inflate by 15 percent in constant currencies compared with $3.08 in 2014, but the reported earnings are now projected to rise by 3 percent to $3.18.