The management of VF Corporation predicts that The North Face will grow by around 12 percent this year and Timberland by about 10 percent, compared with increases of 7 percent and 5 percent, respectively, in 2013. The acceleration became evident in the fourth quarter of last year, when the two brands grew by 12 and 13 percent, respectively.
Vans rose by 14 percent in the fourth quarter and by 17 percent for the full year, reaching a level of more than $1.7 billion. It rose by 20 percent in Europe, where the success it has enjoyed in the U.K. is spilling over to Germany, France and Italy. Similar brand activation models are being rolled out in Turkey and Russia.
At TNF, the growth in the latest quarter was fueled by an increase of more than 30 percent in revenues from its own retail stores and e-commerce, with a healthy increase in same-store sales. Wholesale revenues rose by a mid-single digit. These sales increases helped VF's biggest brand to reach for the first time an annual turnover of more than $2 billion.
Cold weather conditions contributed to the growth in the fourth quarter, and they are expected to lead to significantly higher pre-orders for the next autumn/winter season. The management reported higher-than-anticipated sales in the U.S. for TNF's new Thermoball insulation technology, which is being applied to a large number of styles for the next season, especially for women. It also mentioned the brand's new FuseForm bonding technology, which won a prize at the recent Outdoor Retailer Winter Market in Salt Lake City.
TNF's sales went up by 10 percent in the U.S. and by 11 percent in the rest of the world during the fourth quarter, and its international growth is expected to be replicated in 2014. While recording a mid-single-digit increase in Europe in the quarter, outpacing the competition, the brand scored a gain of more than 20 percent in Asia.
The group is strengthening the development of local product offerings for TNF as well as relations with local key accounts, especially in Europe. Many new partner stores will be opened this year in the U.K., Germany, France, Italy and Russia. In China, TNF should enjoy a sales increase of more than 15 percent this year on the back of increased marketing investments in the second half of 2013.
In line with expectations, Timberland's sales outside the U.S., which represent about 60 percent of its total turnover, rose by 2 percent in terms of U.S. dollars in 2013. They fell in Europe during the first nine months of the year, but then recovered in the fourth quarter with a gain in the low teens. Modest growth was registered in the Asia-Pacific region, and sales in Japan declined in terms of dollars but were up in yens.
The management sees Timberland growing by a high single digit internationally, with similar growth in Europe and an increase in the low teens in Asia. In the Americas, the brand's growth of 10 percent in 2013 should be repeated in 2014. The growth rate in the region reached a level above 15 percent in the final quarter of last year, benefitting from the re-launch of Timberland's apparel range and the global “Best Then, Better Now” campaign as well as product innovations.
Combined with Vans and other brands, VF's Outdoor & Action Sports Coalition saw its sales go up by 12.3 percent to $1.92 billion in the fourth quarter. For the full financial year, its revenues increased by 8.7 percent to $6.38 billion, representing 56 percent of VF's total turnover. The segment's operating profit rose by 8.5 percent to $1.11 billion.
The VF group as a whole raised its revenues by 8.5 percent to $3.29 billion in the final quarter of the year, falling short of analysts' projections. In constant currencies, total sales were up by 10 percent outside the U.S., with increases of 15 percent in Europe and 14 percent in China.
The quarterly gross margin improved by 0.8 percentage points for the group to 48.2 percent, thanks in particular to higher retail activities, supply chain efficiencies, and an ongoing shift in the product mix to higher-margin products. The adjusted operating margin went up to 15.5 percent from 15.1 percent in the year-earlier period.
For the full financial year, revenues rose by 4.9 percent to $11.3 billion. The gross margin increased by 1.8 percentage points to 47.5 percent, and the adjusted operating margin by 0.7 percentage points to 14.5 percent. Net earnings advanced by 11.4 percent to $1,210 million, but it was up by 13 percent on an adjusted basis (more in The Outdoor Industry Compass).
