VF Corporation has upgraded its sales forecast for Timberland after a very good first quarter in which the brand's sales rose by 12 percent, two percentage points better than the group had expected in February. As for The North Face, its sales went up by 14 percent in the quarter, accelerating from the 12 percent increase recorded in the fourth quarter if 2013.
Vans turned into the biggest brand within the group during the quarter, rising by 20 percent after 17 consecutive quarters of double-digit growth. Sales through company-owned stores and over the internet went up by 19 percent.
An increase of more than 40 percent in direct-to-consumer sales led Vans to post a sales increase of 20 percent in Europe. The new House of Vans in London was a big success, and its European website is being redesigned.
Vans' sales advanced by more than 40 percent in Asia-Pacific. Sales in China more than doubled, and Vans opened its first skate park in Korea.
A good surprise was a sales increase in Europe for the group of 12 percent in dollars and 8 percent in local currencies, with positive results for almost all brands in VF's portfolio. In Europe, sales went up by a low single digit for TNF and by a high single digit for Timberland.
Karl Heinz Salzburger, VF's president of international operations, regarded TNF's performance in Europe as a “solid” result considering the fact that the winter was much warmer than normal. He said the brand had made significant progress in adapting its apparel line to the European fit and in expanding its snow sports range and its activity-inspired categories in line with the local demand.
TNF's online sales were up by more than 30 percent in the region in the quarter. Timberland introduced e-commerce operations in France, Germany and Italy during the period, building on the success that this sales channel had encountered in the U.K.
Globally, Timberland experienced balanced growth between its wholesale and retail operations, but in the U.S., its wholesale business expanded by more than 20 percent in the Americas, while its retail sales showed double-digit growth on a comparable store basis. Timberland\'s sales in Asia-Pacific rose by a low double digit.
TNF's sales increased by more than 15 percent in the Americas and by around 15 percent in the Asia-Pacific region. The global 14 percent sales increase obtained by the brand in the quarter was driven by a 30 percent jump in its direct-to-consumer sales.
Overall, VF's Outdoor & Action Sports Coalition raised its sales by 13.8 percent in the quarter to $1,575 million, and the management is now expecting that it will grow between 12 and 13 percent for the full year. Vans was the biggest contributor to the growth of the division in the first quarter with a sales increase of 20 percent that pulled it momentarily ahead of TNF in a seasonally weak period for the latter brand (more on Vans in Shoe Intelligence). Other brands in the division - notably SmartWool, Lucy and Napapijiri - performed well, too.
The division's operating profit improved by 21.2 percent to $274.5 million, and this helped the group to record a 9.9 percent increase in the quarterly net profit to $297.2 million. Thanks to higher direct-to-consumer activity and the higher margins obtained in outdoor and action sports than in jeans and other activities, the gross margin of the group improved by 1.3 percentage points in the period, reaching an all-time high of 49.4 percent.
VF's total sales rose by 6.5 percent to $2,781 million in the quarter. Across the group, direct-to-consumer revenues grew by 16 percent and came to represent 23 percent of the total turnover. Besides the expansion of its online sales activities, the number of physical stores rose by 33 to 1,263.
After growing by 11 percent, sales outside the U.S. represented 42 percent of the group\'s revenues. On a currency-neutral basis, they went up by 10 percent, with increases of 8 percent in Europe, 25 percent in China and 17 percent in other parts of Asia. Outside the U.S., sales in the rest of the Americas were up by 8 percent in local currencies.
Looking ahead, the management is guiding investors toward the higher end of its 7-8 percent growth forecast for its revenues in 2014. The operating margin is still projected at around 15 percent.
