For the full year 2012, VF Corporation, the marketer of outdoor brands such as Timberland, The North Face, Eagle Creek and others along with a wide range of fashion and sportswear labels such as Wrangler, Lee, Nautica and others, has posted a sales increase of 15 percent to $10.9 billion.
That equates to a 17 percent rise in constant dollars. The gross margin improved by 0.75 percentage points to 46.5 percent, while the operating profit reached $1.5 billion, corresponding to an increase of 17 percent. Timberland's acquisition accounted to the whole income by 6 percentage points of the total growth. The net income on an adjusted basis was up by 18 percent to $1.1 billion.
The last three months saw the total sales figures increasing by 4 percent (5 percent in constant dollars) to a record $3.0 billion. The growing turnover was mainly driven by the Outdoor & Action Sports category as well as international and direct-to-consumer sales. VF's gross margin for the fourth quarter improved by 2.2 percentage points to 47.4 percent. The operating profit grew by 28 percent to $457 million, while the net income went up by 32 percent to $344 million.
For all of 2012, the total sales of the Outdoor & Action Sports division jumped from $4,562 million to $5,866 million. The profit grew from $828.2 million to $1,019 million. A negative impact from foreign currency exchange effects weighed on Outdoor & Action Sports' sales to the tune of $117.9 million for the full year, and for the entire group $169.8 million. The impact on the profit was $33.3 million for the outdoor category and $38.9 million for the entire corporation.
During the last three months of 2012, the Outdoor & Action Sports division's sales increased by 6 percent to $1.71 billion, mainly driven by The North Face and Vans, the group's fast-growing brand of action sports gear, but partly offset by the evolution of Timberland. TNF's sales were up by 10 percent and by 11 percent in constant dollars. The outdoor brand was not particularly affected by unfriendly warm weather, notably in the U.S., and was up both in the Americas and Europe as well as in Asia, where the brand developed by far faster than in the West. The management noted a reasonable balance between increases provided by TNF's wholesale arm and corporate retailing. In fact, The North Face's direct-to-consumer retail operations increased by 13 percent in the fourth quarter compared with 8 percent for the entire corporation.
Timberland, on the other hand, suffered from the unwelcome warm weather and posted a sales decline of 4 percent for the fourth quarter. It grew strongly in Asia, but was offset by weaker sales in both the Americas and Europe. Timberland managed globally to increase its own retailing by 5 percent, but struggled with weaker wholesale turnover due to softened closeout sales.
In the last three months, the Outdoor & Action Sports category booked an increase in operating profit of 18 percent to $322.2 million. The operating margin improved by 1.9 percentage points to 18.8 percent compared with 16.9 percent in the comparable period in the previous year.
For the current year, the VF management is cautious as far as the outlook is concerned. Usually expecting double-digit annual growth, the group expects an increase of 6 percent for 2013. Eric Wiseman, VF's chairman, president and chief executive, hinted that the performance has to face external factors such as the uncertainties of the European business, which contributes some 22 percent to the group's entire turnover.
What is more, the current winter season started with unusually warm weather, which puts pressure on one of the group's main brands, The North Face. Altogether, the management expects an increase of the Outdoor & Action Sports division of 10 percent for the current year, mainly driven by Vans with projected sales increases of nearly 20 percent, by The North Face in the mid-teens and by Timberland in the mid single digits.
There is better news on the profit side of life. VF expects the gross margin to improve by 1.0 percentage point to some 47.5 percent, a target that was originally set for 2015 and may already be met this year.