Q1 2013 Earnings Call Transcript

Transcript Call Date 04/26/2013

Operator: Good day and welcome to the VF Corporation First Quarter 2013 Earnings Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Lance Allega, Director of Investor Relations. You may begin, sir.

Lance Allega - Director, IR: Thank you, operator. Hello everyone, and thank you for joining us today to discuss VF's first 2013 results.

Before we begin, I would like to remind participants that certain commentary included in today's prepared remarks and the Q&A session may constitute forward-looking statements under definition of the federal securities law. Forward-looking statements include management's current expectations, estimates and other projections about our business results of operations and the industries in which VF operates.

Actual results may differ materially from those projected in the forward-looking statements. Important factors that could cause actual results to differ materially from those projected in the forward-looking statements are discussed in the documents filed with the SEC.

Additionally, participants on today's call may discuss non-GAAP financial measures. You'll find the appropriate reconciliations in our press release which was issued about an hour ago and on our website at

Joining us on today's call will be VF's Chairman and Chief Executive Officer, Eric Wiseman; Bob Shearer, our Chief Financial Officer; and our Group President, Scott Baxter; Karl Heinz Salzburger and Steve Rendle.

Following our prepared remarks, we'll take your questions, and we ask that you limit your questions to two to allow us to get to as many of you as possible. In the event you have additional questions that are not covered by others, please re-queue and we will do our best to get back to you. Thanks for your cooperation on this.

Now, I will turn the call over to VF Chairman and CEO, Eric Wiseman. Eric?

Eric C. Wiseman - Chairman, President and CEO: Thanks, Lance. Good morning, everyone, and thank you for joining us today. 2013 is off to a great start for us with results beating our expectations. Consistent with what we told in February, our first quarter revenue growth rate was a few points below our full year target of 6% and as we've seen over the last year our diverse model continues to deliver great bottom line results, and especially from our lifestyle brands and our international and direct-to-consumer business. In fact, our record earnings per share in the first quarter was a little better than our expectations and with record revenues and record gross margin it is another fantastic quarter for VF.

During the quarter our Outdoor & Action Sports business grew revenues by 10%, amid concerns about fluctuating weather conditions impacting cold weather brands. Our international business was up 6%, despite continued economic weakness in Europe and inventory overhang in China, and our direct-to-consumer business rose 12% with strength both here and abroad even in a generally sluggish microenvironment. While the economic environment is overall a headwind, we are very encouraged and proud of the consistent improvement in our profitability. Both gross and operating margin showed substantial expansion over the prior year's first quarter with gross margin up 240 basis points and adjusted operating margin rising by 130 basis points. Together, this growth and profitability enabled VF to deliver a 25% improvement and adjusted earnings per share to $2.43.

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