Sales of VF Corp.'s outdoor and action sports division, with brands ranging from The North Face to Timberland and Vans, among others, advanced in the first quarter by 2 percent to $1.6 billion, which amounted to a rise of 10 percent in constant currencies.
Vans lifted its sales by 16 percent in constant currencies for the quarter and by 8 percent in reported terms, with increases in both wholesale and retail sales. The brand's sales in the Americas region enjoyed an underlying increase at a high-teen percentage rate, while European sales inflated at a mid single-digit rate in constant currencies. This underlying rise turned into a low double-digit sales decline in dollars. Vans remained most buoyant in Asia-Pacific, where its turnover climbed by more than 45 percent in constant currencies.
When it comes to Timberland, the brand's sales were flat in dollars but they grew by 10 percent in constant currencies, with a 16 percent rise in its wholesale business. This wholesale expansion buoyed sales in the Americas, where Timberland's turnover advanced at a high-teen percentage rate. In Europe, the brand enjoyed an underlying sales increase at a low single-digit rate, albeit turning into a mid-teen rate decline in dollars. The Asia-Pacific region delivered a sales increase at a high single-digit rate for the quarter in constant currencies.
Operating income for the outdoor and action sports division advanced by 7 percent in constant currencies but in reported terms it fell by 5.0 percent to $260.8 million. This amounted to an operating margin of 16.2 percent, down by 1.2 percentage points. Apart from the changes in currency exchange rates, VF mentioned more investments in own retailing, with 116 extra stores at the end of the quarter compared with the same time last year.
The entire group's sales reached $2,803 million for the quarter, which was an increase of 2 percent in dollars and 8 percent in constant currencies. This included an increase of 9 percent in international sales, with rises of 4 percent in Europe, 17 percent in Asia-Pacific and 16 percent in the Americas outside of the U.S. Own retail sales jumped by 11 percent in constant currencies.
For the full financial year, the group forecasts a mid-teens increase for Vans and an unchanged forecast of a low-teen percentage rate increase for Timberland. The entire outdoor and action sports division is still projected to raise its turnover at a low double-digit rate in constant currencies.
The group's gross margin dipped by 0.4 percentage points to 49.0 percent for the quarter, as currency exchange rate changes erased benefits from the continuous improvement in sales mix. VF still predicts that its gross margin will rise by 0.7 percentage points to 49.5 percent for the full year in constant currencies, or 49.2 percent in reported terms.
VF's operating margin dipped by 0.5 percentage points to 14.0 percent. Net income was down by 2.9 percent to $288.7 million.
VF remains bullish about the longer-term prospects for its larger sports and outdoor brands, eying sales of $2.3 billion for The North Face in a market estimated at $26 billion for outdoor performance and a turnover of about $2.0 billion for Vans in an action sports market pegged at $29 billion. The outlook for Timberland calls for sales of $1.8 billion in a market valued at $36 billion for outdoor lifestyle products;
More in Sporting Goods Intelligence Europe.