V.F. Corp. (VFC) Tops Q3 EPS by 12c, Beats on Revenues; Boosts FY17 EPS/Revenue Outlook Above Consensus

V.F. Corp. (NYSE: VFC) reported Q3 EPS of $1.23, $0.12 better than the analyst estimate of $1.11. Revenue for the quarter came in at $3.5 billion versus the consensus estimate of $3.39 billion.

2017 Outlook Raised

The following outlook for 2017 has been updated and includes the following:

• Revenue is now expected to increase about 6 percent on a reported basis (up 5.5 percent currency neutral) to approximately $12.1 billion. This compares to the previous expectation of $11.85 billion, a 3.5 percent increase on a reported basis (up 4.5 percent currency neutral). Both estimates include about a $200 million contribution from the previously announced Williamson-Dickie acquisition. By coalition, revenue for Outdoor & Action Sports is now expected to increase approximately 7 percent versus the previous expectation of an approximate 5 percent increase (up 6 percent to 7 percent currency neutral); revenue for Jeanswear is now expected to decline slightly versus the previous expectation of revenue that approximated that of 2016; Imagewear revenue is still expected to increase at a mid-single-digit percentage rate; and, Sportswear is still expected to decline at a high single-digit percentage rate.
• International revenue is now expected to increase approximately 10 percent versus the previous expectation of a low single-digit increase (up high single-digit currency neutral).
• Direct-to-consumer revenue is now expected to increase approximately 13 percent versus the previous expectation of a 10 percent to 11 percent increase. Digital revenue is now expected to increase approximately 30 percent versus the previous estimate of a more than 25 percent increase.
• Gross margin is now expected to approximate 50.0 percent, versus the previous expectation of 49.5 percent, and includes about a 50 basis point negative impact from changes in foreign currency. The Williamson-Dickie acquisition is expected to negatively impact gross margin by about 20 basis points.
• Operating margin on a reported basis is expected to be 12.3 percent; adjusted operating margin is expected to approximate 13.4 percent, versus the previous expectation of 13.7 percent, including about a 50 basis point negative impact from changes in foreign currency. The Williamson-Dickie acquisition is expected to negatively impact adjusted operating margin by about 20 basis points.
• Earnings per share on a reported basis is expected to be $2.73; adjusted earnings per share is now expected to be $3.01 compared to the previous expectation of $2.96. Accordingly, adjusted earnings per share is expected to increase 1 percent (up 6 percent currency neutral), compared to 2016 adjusted earnings per share of $2.98. Relative to the prior outlook, the company’s updated 2017 adjusted earnings per share outlook includes an additional $0.05 per share ($25 million pretax) impact from additional investments to drive accelerated growth into 2018 and beyond. This is in addition to the $0.08 per share ($40 million pre-tax) impact from additional investments announced on July 24, 2017.
• Other full year assumptions include an effective tax rate of approximately 20 percent (down from a tax rate in the low 20 percent range previously) and cash flow from operations is expected to reach approximately$1.5 billion (up from $1.45 billion previously).

GUIDANCE:

V.F. Corp. sees FY2017 EPS of $3.01, versus the consensus of $2.98. V.F. Corp. sees FY2017 revenue of $12.1 billion, versus the consensus of $11.88 billion.

Highlights

• Third quarter revenue from continuing operations increased 5 percent to $3.5 billion (up 4 percent currency neutral);
• Gross margin from continuing operations improved 100 basis points (up 180 basis points currency neutral) to 50.1 percent;
• Outdoor & Action Sports revenue increased 8 percent (up 6 percent currency neutral); Vans® brandrevenue increased 28 percent (up 26 percent currency neutral);
• International revenue increased 13 percent (up 10 percent currency neutral), including 18 percent growth in Europe (up 14 percent currency neutral) and 9 percent growth in China;
• Direct-to-consumer revenue increased 18 percent (up 17 percent currency neutral) with digital revenueup 38 percent (up 37 percent currency neutral);
• Reported earnings per share from continuing operations decreased 16 percent (down 12 percent currency neutral) to $0.97 due to a noncash goodwill impairment charge; adjusted earnings per share from continuing operations increased 6 percent (up 10 percent currency neutral) to $1.23;
• 2017 revenue now expected to increase about 6 percent on a reported basis (up 5.5 percent on a currency neutral basis) to approximately $12.1 billion;
• 2017 reported earnings per share is now expected to be $2.73; adjusted earnings per share from continuing operations is now expected to be $3.01, including an additional $25 million, or $0.05 per share, of incremental investment, up 1 percent on an adjusted basis (up 6 percent currency neutral) compared to 2016 adjusted earnings per share of $2.98; and,
• Quarterly dividend rate increased by 10 percent to $0.46 per share.

For earnings history and earnings-related data on V.F. Corp. (VFC) click here.

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