Skechers' stock market capitalization went up by 6.3 percent last Thursday, following a Tweet message according to which VF Corporation, the parent of Timberland, Vans and other brands, was in advanced negotiations to buy the company at a high premium, giving it an enterprise value of about $6.5 billion.
On the next day, while commenting on VF's excellent quarterly results, the group's chief executive, Steve Rendle, indicated that Skechers would not be a good fit for its recently revisited brand portfolio, which focuses on the outdoor, active and work segments. However, with free cash flow of more than $1.5 billion expected in the current financial year, VF continues to be on the hunt for suitable acquisitions.
VF's own share price jumped by more than 12 percent after the release of its income statement for its third quarter, ended on Dec. 29. Powered by sales increases of 25 percent at Vans and 14 percent at The North Face, group revenues increased by 8 percent to $3.94 billion, with growth of 10 percent in local currencies.
Excluding acquisitions and divestitures, the adjusted gross margin improved by 0.6 percentage points to 52.2 percent, while the adjusted operating margin rose by 2.8 percentage points to 16.8 percent. The group ended up with a net profit of $463.5 million for the quarter, compared with a loss of $90.3 million in the year-ago period.
In constant currencies, Vans delivered a 27 percent sales increase globally, with growth of 29 percent in the Americas, 10 percent in Europe, the Middle East and Africa (EMEA) and 41 percent in Asia-Pacific. Online sales jumped by nearly 60 percent, including a 45 percent increase in Europe.
The skate shoe brand, whose sales are seen likely to reach a level of $5 billion by 2023, benefited in the latest quarter from a strong momentum for its Old Skool line and a fast-growing business with slip-on styles.
Vans represents the bulk of VF's Active division, whose total sales went up by 16 percent in the quarter to $1,142.6 million, generating 37 percent higher operating earnings of $272.9 million. For the full financial year, the Active segment is projected to grow by 16 percent as well, driven by a 23 percent jump at Vans.
In contrast, Timberland booked a currency-neutral sales increase of only 3 percent in the latest quarter, rising by 7 percent in the Americas, but recording a 2 percent decline in EMEA and flat sales in Asia-Pacific. In China, the brand's sales grew by 25 percent in dollars and by 30 percent in the local currency, however.
More in Sporting Goods Intelligence Europe and The Outdoor Industry Compass.