VF Corporation Beats Earnings: Should You Buy?

Source: VF Corp

The Numbers

Total sales during the second quarter of 2014 grew 8% to $2.4 billion, roughly in line with analysts’ forecasts.

Gross margin declined 10 basis points to 48.4% of sales due to foreign exchange headwinds and initiatives to reduce inventories in the jeanswear category.

Earnings per share came in at $0.36, a 16% increase versus the same quarter in the prior year, and marginally above forecasts of $0.35 per share.

Management reaffirmed guidance for top-line growth of 8% and earnings-per-share growth of 13% during 2014.

Strong Growth in Outdoor and Action Sports

Source: VF Corp

DTC Segment Is Outperforming

Direct-to-consumer sales increased 18% during the quarter, driven by double-digit gains in every region around the world and nearly every single brand in the portfolio.

The direct-to-consumer segment is becoming increasingly important when it comes to adapting to changing consumer habits and industry trends.

In addition, this channel tends to generate higher profitability over time due to lower associated costs.

Healthy International Growth

International sales grew 14% during the quarter.

Revenue in Europe increased 16 %, or 11% in constant currency.

Sales in the Asia-Pacific region were up 17%, or 18% in constant currency.

Revenue in the Americas -- non-U.S. -- region were up 6%, or 16% in constant currency.

International sales were 36% of total sales during the quarter, compared with 34% in the same period of 2013.

Optimistic Outlook

Source: VF Corp

“Since we announced our 2017 targets more than a year ago, V.F. has shown considerable resilience and exceptional results in the face of the challenging global economic environment, a highly competitive retail landscape and inconsistent consumer trends. When I look at the solid execution of our strategic growth drivers combined with our unrelenting focus on operational excellence, I am extremely confident about our ability to deliver consistent long-term value to our consumers and our shareholders.”

--CEO Eric Wiseman

Diversified Portfolio of Valuable Brands

Source: VF Corp

Powerful Growth Drivers Over the Years Ahead

Source: VF Corp

Ambitious Growth Targets

Source: VF Corp

Massive Cash Flow Generation

Source: VF Corp

Earnings Growth: VF vs. Nike and Lululemon

Valuation: VF vs. Nike and Lululemon

Data Source: FinViz

Foolish Takeaway

VF Corporation delivered healthy financial performance for the second quarter.

The outdoor and action sports segment, the direct-to-consumer channel, and international markets were the main growth drivers during the quarter.

The company is well positioned for growth, and management has ambitious goals over the years ahead.

When compared to peers such as Nike and Lululemon, VF looks attractive in terms of earnings growth and valuation.

VF is positioned to deliver solid returns in the years ahead.

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