VF Corp. (VFC, Financial) has not benefited from the declining department store trend, experiencing a 19% decline in sportswear revenue.
New advertising campaigns coupled with digital and traditional media have doubled VF's customer reach. While all shareholders benefit from VF's obsession with performance, management has not slowed down. Here are a few quotes from a transcript compiled by Seeking Alpha that investors should see.
Accelerated growth
VF was busy launching new products, including a water adventure series as well as an outdoor training category, during the second quarter. With sportswear and accessories up 40% and 60% this quarter, VF's strategy is paying off. Chief Operating Officer Steve Rendle is happy with the results:
During the second quarter, warmer weather categories including sportswear product and accessories saw significant momentum and were up 40% and 60% respectively. In men's fleece sales doubled, driven by a strategic shift to broaden our assortment of technical styles. In women's, newer silhouettes like the Tomales Bay jacket are also seeing strong response, and we're very proud that Outside Magazine featured several North Face products in their Summer Buyer's Guide, including our Favero 70 pack, which won Outside Magazine's Gear of the Year award. This demonstrates that our continued focus to broaden our spring/summer assortment is working.
Timberland is not performing up to management's standards. Its revenue was down 7% during the quarter. Ecommerce business was up 35% during the quarter while wholesale revenue was down from badly timed shipments.
Timberland is also sucking up market share. Awareness, conversion, sell through and market share are all up for Timberland, leading management to believe the brand's struggles are short term.
Maximization
VF has a focus on maximizing growth and the returns it creates for shareholders. That focus on efficiency has led VF to sell its 7 For All Mankind, Splendid and Ella Moss brands to Delta Galil Industries. With inventory building up to higher-than-expected levels, Rendle expects a more challenging sales scene:
While these results were for the most part in line with our expectations for the brand's smallest quarter, as we enter the second half of the year, we have seen higher-than-anticipated inventory levels, particularly in our Americas business, and anticipate a more challenging sales environment. Accordingly, we're electing to take a more conservative view for the balance of 2016 as this product works through the channel.
With all the various segments VF has as part of its business, Jeanswear has exceeded managements expectations. VF saw Jeanswear revenue up 6% with its Imagewear coalition up 3%. Management sees things starting to "come to life" this fall with the real momentum starting in 2017.
No need to change course
As far as management is concerned, competition has not hampered its wholesale business. Even with excess inventory and a tough winter, management sees no need to change course. But the direct-to-consumer segment was the most impressive to management. CEO Eric Wiseman gave an update:
Clearly this year, we're off to a slower start given all the implications of last winter and the inventory hangover that we faced in the first half of this year. But when you step back and look at our organic growth rate, internationally we were up 7%. That tells us that against that 8% organic growth rate goal outside of the U.S., we're pretty much on track. The most confidence-inspiring part of this for me is that in our direct-to-consumer business globally we were up 7%. So being up 7% in our stores tells us that consumers are buying from us at the kind of growth rate that we have built into our long-term vision.
Disclosure: No position in the stock mentioned.
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