In today’s uncertain market, it’s nice to see when companies exceed expectations – and when the driving force comes from deep within the boardsports business. In an earnings presentation on Monday, October 23, the VF Corporation – home of VANS, outdoor brand The North Face and now also work wear stalwarts Dickies – reported results that topped estimates for Q3 of 2017.
For the quarter ended September 30, 2017, overall revenues for the VF Corp were reported at $3.5 billion, a 5 percent increase on last year’s period, while international revenues were up 13 percent. And the main star of this massive success is a waffle-gripped shoe company known to everyone in the boardsports business: VANS!
As the breakout of this quarter, VANS increased revenues by 28 percent in reported terms (26 percent currency-neutral) over last year’s period. The Outdoor & Action Sports coalition remains the strongest segment for VF, with revenues up by 8 percent in Q3 2017 to reach a total of $2.5 billion. Profits in the coalition were reported at $524.4 million.
“VF’s third quarter results were strong, fueled by accelerated momentum across the company’s international and direct-to-consumer platforms and our Outdoor and Action Sports and Workwear businesses,” said Steve Rendle, President and Chief Executive Officer.
All eyes on VANS
Posting “record-setting growth during the last quarter,” VANS revenues are up 28 percent globally and 23 percent in the Americas. But the real kicker is Europe (EMEA) where the iconic footwear brand posted 42 percent growth after minor difficulties over the past few quarters. Asia-Pacific also increased heavily, with 23 percent growth from last year’s period.
VANS digital business increased 60 percent and wholesale grew 35 percent internationally. Digital growth in Europe was supported by the launch of the VANS Customs 2.0 platform.
Speaking about Vans in more detail, Steve Rendle said in the earnings call: “Vans icons including the Old Skool and black-and-white checkerboard designs more than doubled in the quarter.” The higher-priced Ultra Range achieved over 50 percent sell-through in DTC and delivered great launch results.
Answering the question whether these kinds of growth levels for VANS are sustainable, Rendle said: “The confidence we have in our largest brand is high. The brand is stronger than it has ever been, with broad-based growth against all regions, channels, and product categories. Retail inventory levels are in great shape and we remain disciplined in respect to inventory management, merchandising and assortment planning. We see a strong growth trajectory for this brand as we move into 2018.”
In the bigger picture, VF’s international revenue increased 13 percent in Q3. The main growth came from Europe, where VF grew its business by 18 percent, followed by 9 percent growth in China.
One of the key drivers of VF’s success is its strategic expansion of direct-to-consumer sales(DTC) over the past few years. The number of DTC stores in the VF portfolio is now at 1,508 globally, up from 1,475 in late September 2016.
These investments into strengthening VF’s omnichannel backbone have led to DTC revenue growth to the tune of 18 percent in Q3 2017, with a digital revenue increase of 38 percent.
Also worth mentioning is the completed acquisition of Williamson-Dickie, makers of Dickies work wear. Completed on October 2, 2017, the deal is expected to contribute about $200 million to VF’s full-year revenues. Workwear grew 11 percent during Q3 2017, according to VF.
On the strength of today’s Q3 numbers, the VF Corp adjusted its outlook for the entire 2017 financial year and expects revenues to grown by 6 percent to approximately $12.1 billion. 2017 reported earnings per share is now expected to be $2.73.
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). The VANS brand is expected to grow by 15 percent in 2017.
As a result of these news, VF Corp stock jumped to a 52-week high in trading on Monday, reaching $71.92 per share after opening at around $66.33 per share.
Looking ahead, Steve Rendle said: “Based on the strength of our third quarter performance and the stronger growth trajectory we see for the remainder of 2017, we are again increasing our full year outlook and making additional growth-focused investments aimed at accelerating growth and value creation into 2018 and beyond.”
Quotes taken from VF’s official press release with supplemental quotes from earnings call broadcast on VF’s investor website.