Lee, Wrangler owner’s shares fall on fading jeans business
Business Live - Oct 22nd 2018, 08:01
VF Corp shares fell 9% after the apparel maker lowered revenue forecasts for its jeans business and reported slow outdoor wear sales even as its popular Van sneakers lifted quarterly profit.
In August, VF said it would spin off its less profitable Wrangler and Lee jeans into a publicly traded company, allowing it to focus on Vans and its outdoor wear businesses to help improve profit margins.
Revenue for the year from its jeans business will fall in a range of 1 to 2%, compared with previous forecasts for flat revenue growth.
Its shares were down as much as 9.1% at $79.09 in midday trading. They have risen roughly 18% year to date.
Second-quarter revenue at Timberland, part of the company’s outdoor wear business, fell 2%, Wrangler was down 5% and Lee was off 9%. Gross margin from continuing operations decreased 10 basis points to 50.1%.
“There is noise in this quarter, but when you zoom out and click and look at the big picture, we’re in fundamentally the same place that we thought we were,” VF CFO Scott Roe said when asked about the jeans business, whose spinoff will be completed in April next year.
Still, its high-margin Vans business revenues rose 26% and online sales for the brand grew 55%, lifting its second-quarter profit by a better than expected 7.5%. Overall, its active business revenue rose 19%. It also raised its full-year forecasts and increased its quarterly dividend by 11%.
“While the results were generally strong, the lack of upside on gross margin and the deterioration in the jeans business, led by Lee … raise some questions around the story,” Wedbush Securities analyst Christopher Svezia wrote in a note.
VF has kept its inventories flowing, selling its clothes and shoes at full price and providing fresh styles to lure millennials as it tackles rising competition from the likes of Nike Inc.
It raised its full-year adjusted earnings forecast to $3.65 per share from the previously expected range of $3.52 to $3.57. It expects revenue for the year to be above or equal to $13.7bn.
Income from continuing operations rose to $507.1m, or $1.26 per share, in the second quarter ended Sept. 29, from $473.8m, or $1.19 per share, a year earlier.
Excluding certain items VF earned $1.43 per share, beating analysts’ average estimate of $1.33, according to Refinitiv estimates.
Net revenue rose 15% to $3.91bn, above the market expectation of $3.87bn.Business Live
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