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VF shares rise even as company cuts guidance

Shares of apparel maker VF Corp. were among the few gainers on Wednesday, as the company cut its fourth-quarter guidance on weak sales but outlined an outlook and cost-cutting plan for the year ahead.
/ Source: The Associated Press

Shares of apparel maker VF Corp. were among the few gainers on Wednesday, as the company cut its fourth-quarter guidance on weak sales but outlined an outlook and cost-cutting plan for the year ahead.

Shares rose $3.31, or 6.5 percent, to close at $54.95, an anomaly as the market tumbled on a weak retail sales report by the Commerce Department and banking sector fears. The Dow Jones industrials closed down nearly 215 points.

"It's been a really, really brutal last six months for all of us," said company Chairman and Chief Executive Eric Wiseman during a presentation at the ICR XChange Conference on Wednesday, speaking about retailers in general. "We're facing really unprecedented challenges with consumers."

VF said it now expects to report fourth-quarter revenue fell 2 percent from a year earlier, down from previous guidance of a 3 to 4 percent gain. It now estimates earnings of $1.30 to $1.35 per share, excluding a charge related to a cost-cutting plan. Previously the company said earnings would rise 1 to 5 percent, implying earnings of $1.47 to $1.53 per share. Analysts expect $1.46 per share.

For the year, the company now expects profit to be flat, with adjusted earnings up 5 percent to 6 percent. It expects revenue to rise 6 percent, from a previous forecast of 7 percent to 8 percent.

The company said it plans to implement a cost-cutting plan to save $100 million annually, with broad-based cost cutting across expenses, wages, hiring, product costs, marketing and other areas.

Last month VF said it would be cutting a "modest number of jobs" on expectations for continued economic weakness.

For 2009 "we're not anticipating any improvement or deterioration," Wiseman said. "What's really changed is consumer confidence. This situation in the apparel space is much less about inability to spend than it is about an unwillingness to spend."

However, he said their are two non-macro factors that VF alone is dealing with, a charge related to its pension plans, which will cost about 50 cents per share in 2009, and the detriment of the stronger dollar, which will hurt earnings by 20 percent per share in 2009.

However, the company said it expects earnings per share in 2009 to be "relatively stable" in 2009 compared with 2008. Excluding the 70 cents per share in charges, the company expects to exceed its 10 percent to 11 percent long-term earnings growth target.

The Greensboro, N.C., company said it will benefit from its diversified business — its brands include Vans, Jansport, 7 For All Mankind, North Face and Wrangler, among others — and lower cost structure.

Citi Investment Research analyst Kate McShane said in a note to investors that the company's balance sheet remains strong and reiterated her "Buy" rating on the stock.

She said that excluding the pension and stronger dollar expenses, VF's 2009 guidance was better than she expected and the pension expense is less than she expected.

"While VF is clearly not immune to the impact of broader macro pressures on retail, we continue to view the company as strongly positioned relative to peers, with a broad portfolio of winning brands, highly diversified distribution, and nascent retail and international strategy driving long term growth," she wrote.

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AP Business Writer Michelle Chapman contributed to this report.