Outdoor financials: VF raises Q1 outlook, plus Columbia, Kellwood, Russell
VF raised its Q1 outlook, Columbia's stock hit a new 52-week high after an analyst upgrade, and Kellwood has arranged a $400 million line of credit.
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VF raises Q1 outlook
VF Corp. (NYSE: VFC) has raised its first-quarter earnings outlook on a stronger-than-expected showing in its outdoor and jeans business, forecasting a 12 percent to 14 percent rise in first-quarter earnings per share.
The company previously said it expected its earnings per share to be up slightly over the $1 per share reported in the year-ago period. But new accounting rules resulted in a one-time cumulative effect adjustment of $0.10 per share. Analysts expect earnings of $1.03 per share.
VF Corp. also reaffirmed its previous sales guidance, saying it forecasts a 5 percent sales increase in the quarter, over the $1.56 billion posted in the year-ago quarter. Analysts said they expect the company to post $1.63 billion in revenue.
Shares of VF Corp. jumped nearly 9 percent on the April 17 news â€“ its highest in almost seven months â€“ up $3.61 at $59.57 in late morning trade on the New York Stock Exchange.
Prudential Equity Group analyst Lizabeth Dunn called VF Corp.’s performance “particularly impressive in light of what other consumer companies are saying.” Dunn had downgraded VF Corp. late on Sunday to “neutral weight” from “overweight” and cut her price target to $58 from $65, saying inventory reductions at Wal-Mart Stores, a major VF customer, were likely to hurt denim sales. Yet, in light of Monday’s new profit forecast, Dunn reinstated her “overweight” rating and $65 price target.
VF Corp., which owns the JanSport, Eastpak and The North Face brands, is expected to release first-quarter results on April 25.
Columbia stock hits new 52-week high after analyst upgrade
After meeting company management several times over the last two months, Citigroup has changed its rating for Columbia Sportswear (Nasdaq: COLM) from â€œHoldâ€ to â€œBuy,â€ skyrocketing its stock to an all new 52-week high.
Shares of Columbia Sportswear rose $3.93 to $57 on the Nasdaq Stock Exchange on April 11, beating a previous 52-week high of $55.39 it hit on March 22. It ended the day at $56.60.
Citigroup noted that the company seemed to be successfully turning its business around with consistent double-digit earnings per share growth on tap for next year. Analyst Kate McShane said that each time Citigroup met with Columbia executives, “we gained more confidence management was taking the right steps to position the company well for future growth.”
In addition to raising Columbia’s rating to â€œBuy,â€ Citigroup also raised its target price to $64 from $52.
Citigroup has also been checking in with retailers over the past few weeks and found that Columbia’s winter merchandise sold very well this past winter, McShane said.
“We are impressed by the company’s footwear prospects and think its outerwear and sportswear have improved significantly, which should bode well for future sales,” McShane wrote in a client note. “We also think its segmentation strategy is a step in the right direction.”
The company’s footwear business is also poised to improve under a new president, and merchandising changes at the sportswear division are performing well at retailers, McShane added.
“We think the initiatives the company is taking with its international business, its renewed emphasis on segmenting the brand and its acquisitions of small but value-added businesses” will result in stronger than expected earnings per share growth, she said. “We think we could see consistent double-digit earnings per share growth beginning in 2007.”
Kellwood arranges $400 million line of credit
Kellwood (NYSE: KWD), parent of Sierra Designs and Kelty, has completed a $400 million five-year credit facility, saying the credit line will be used for general corporate purposes, to fund acquisitions and as a source of working capital.
Kellwood terminated its credit facility from Oct. 20, 2004, which also ends subsidiary guarantees of the company’s 1997 and 1999 debentures. The 2004 convertible debentures automatically terminate with the facility’s closing.
Additionally, the company has updated the schedules on its website to provide sales by business segment for ongoing operations for each quarter of fiscal 2005 and 2004.
Banks participating in the new credit facility include Bank of America, N.A., as administrative agent, JPMorgan Chase Bank and Wachovia, as co-syndication agents. The Bank of Nova Scotia and SunTrust are co-documentation agents. Bank of New York, First Bank, Fifth Third, HSBC, U.S. Bank, and UMB St. Louis are also participating in the new facility.
Berkshire Hathaway to acquire Russell
Russell Corp. (NYSE: RML) said it agreed on April 17 to be acquired by billionaire investor Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A and BRK.B) for nearly $600 million. Under the terms of the merger agreement, Russell stockholders will receive $18 per share in cash in the merger, based on the company’s roughly 33.2 million shares outstanding. The acquisition is expected to close in the third quarter of 2006. Jack Ward, Russell’s chairman and CEO, said the sale will put Russell in a stronger financial position. “Russell will be better positioned against our worldwide competitors in all three segments of our business and that includes apparel, sports equipment and athletic shoes.” Its major brands include Russell Athletic, Jerzees, Spalding, Brooks, Huffy Sports, Bike, Moving Comfort, AAI and Mossy Oak.
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