VF Corporation Segments Show Strong Fundamentals in 1Q15
VF Corporation in 1Q15: Management Has Hopes for a Better Year (Part 2 of 5)
Revenue analysis of VF Corporation’s (VFC) 1Q15 results
VF Corporation (VFC) reported revenue of $2.8 billion in 1Q15, an increase of 2% over the corresponding quarter of last year. Revenue was up by 8% on a currency-neutral basis. Revenue rose for four out of five reporting segments.
In contrast, peers Nike (NKE), Under Armour (UA), and Lululemon Athletica (LULU) reported year-over-year revenue growth of 7%, 25.5%, and 15.6%, respectively, in their last reported quarters.
Segment analysis
The Outdoor & Action Sports coalition, VFC’s largest segment, clocked revenue of $1.6 billion in 1Q15, an increase of 2% over 1Q14. Currency-neutral revenue was up by 10%. All three major brands performed well—Vans, The North Face, and Timberland, particularly Vans. Vans sales rose 8% on a reported basis, with growth in both the direct-to-consumer and wholesale channels.
Importantly, the segment experienced healthy growth rates in overseas geographies, which is critical for the company’s long-term prospects.
Jeanswear blues no more?
Revenue from VFC’s Jeanswear segment grew 1% to $700 million. The segment experienced growth in all three regions—the Americas, Europe, and Asia—in reported terms. Its Wrangler brand performed particularly well in the US. However, the other major brand in the coalition, Lee, continued facing challenges in the mid-market price range.
Despite the relatively strong performance by the other four segments, VFC’s contemporary brands coalition continues to face market challenges. The segment’s revenue declined 11% to $88 million in 1Q15. As it’s the company’s smallest coalition, its impact on performance is minimal. The company recorded $396 million in segment impairment charges in 4Q14.
VFC and peers Nike (NKE) and UA together constitute 0.6% of the iShares Core S&P 500 ETF (IVV) and 1% of the iShares Russell 1000 Growth ETF (IWF).
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