VF Cuts 2009 Profit Forecast on Falling Jeans Sales

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Wednesday, 29 April 2009 11:09

VF Corp., the world’s largest apparel maker, reduced its 2009 profit forecast on falling sales of Lee jeans and industrial uniforms. The shares dropped 9.3 percent in New York trading after the close of U.S. markets. Earnings per share will be $4.70 to $5 this year, down from $5.42 in 2008. Greensboro, North Carolina-based VF said today in a statement. That compares with a Feb. 10 expectation of about $5.42 and trails analysts’ projection of $5.37, the average of 11 estimates in a Bloomberg survey. VF, led by Chief Executive Officer Eric Wiseman, said full- year revenue will drop 5 percent to 7 percent, hurt by the stronger dollar. Rising unemployment in the U.S. manufacturing and oil sectors hurt demand for uniforms, while denim sales dropped in Europe and in higher-end department stores and specialty stores in the U.S. “The luxury consumer has scaled back,” Chief Financial Officer Bob Shearer told analysts today on a conference call. The company said it will stop giving quarterly financial forecasts, citing volatile global market conditions. VF fell $6.28 to $61 after closing at $67.28 in New York Stock Exchange composite trading. Through today’s close, the shares had advanced 23 percent this year. U.S. unemployment that unexpectedly rose about 12 percent in the manufacturing and petrochemical industries depressed demand for uniforms, leading to an 8 percent sales decline in VF’s imagewear division in the quarter. U.S. job losses have totaled 5.1 million since the recession started in December 2007. ‘Sharp Contraction’ Some specialty stores are going out of business, crimping demand for more-expensive denim, Wiseman told analysts. A sales drop in jeans in Eastern Europe and Scandinavia “accelerated into a sharp contraction in the first quarter,” causing international jeans revenue to sink 8 percent, Shearer said. VF’s domestic denim revenue rose 4 percent, helped by the Wrangler and Lee brands. North Face’s global sales advanced 14 percent, excluding the impact of currency changes, the company said.

First-quarter net income dropped 32 percent to $100.9 million, or 91 cents a share, from $149 million, or $1.33, a year earlier. Analysts had expected profit of 94 cents.

Source: Bloomberg, April 28, 2009