• Q3 profit rose 11% to $242.8m
  • Revenues up 7% to $2.23bn
  • Gross margins up 200 basis points to 46.5%
Strong sales of the North Face and Vans brands have boosted VF Corp

Strong sales of the North Face and Vans brands have boosted VF Corp

Apparel giant VF Corp today (21 October) raised its full-year earnings and revenue outlooks after booking an 11% rise in third quarter profit, and said it intends to focus on building its brands globally to fuel strong organic growth next year.

The company, which owns brands such as Wrangler, Lee, Vans and The North Face, said net income rose to $242.8m or $2.22 a share, in the three months to 30 September, up from $217.9m or $1.94 a share, a year earlier.

Revenues rose 7% to $2.23bn, from $2.09bn last time. And gross margins were up more than 200 basis points to 46.5%, helped by lower product costs, better in-store margins, and clean inventories.

"This quarter's strong organic revenue growth and record gross margins are a testament to VF's diverse business model and powerful brands," said Eric Wiseman, chairman and CEO. "The investments we're making this year to drive growth in our strongest and most profitable businesses are clearly paying off."

The company's Outdoor and Action Sports segment posted a 14% rise in revenue, after heavy marketing helped boost sales of the North Face and Vans brands. And revenues in the global jeanswear unit edged up 1%, despite its exit from the European mass market business.

There was also a 1% rise in Contemporary Brands sales, with growth by Splendid and Ella Moss was offset by a decline in 7 For All Mankind global revenues due to soft conditions in the US premium denim market. And Imagewear, which includes Licensed Sports and Image Apparel, saw sales rise 10%.

But a shift in the timing of some Nautica shipments from the third quarter to the fourth resulted in a 13% decline in Sportswear revenues.

VF Corp said international and direct-to-consumer businesses are key to future growth and margin expansion.

Indeed, while international sales up 10% in the quarter on a constant currency basis, this growth was outstripped by momentum in Asia, where revenues soared 37% on "exceptional" demand for jeanswear and The North Face, Vans and Kipling brands.

"Asia represents a billion dollar opportunity for VF, and we are investing accordingly," said Mr Wiseman. "In China...we're particularly excited about the unique opportunities that The North Face and Vans brands give us to build new categories - outdoor and action sports - in this dynamic market."

In its direct-to-consumer business, revenues rose 10%, driven by 21 new store openings and comp store growth - taking its total owned retail stores to 779 at the end of the quarter.

Looking ahead, the company sees strong revenue growth to continue in the fourth quarter, with full year revenues rising by more than 5% to $7.6bn. Earlier guidance pointed to an increase of 4-5%.

VF Corp also raised its earnings to a range of $6.25 to $6.30 per share, up from previous forecasts of $6.10 per share.

"We look forward to wrapping up a very strong 2010, with revenues near record levels and all-time highs in gross margins and earnings," concluded Mr Wiseman.

"Looking ahead, we are confident that the investments made this year will drive another year of solid top and bottom line growth in 2011."