Dive Brief:

• Sales in China, the pandemic-era "gorpcore" trend, more direct sales, an emerging comeback at Vans and an extra calendar week helped drive a 23% increase during VF Corp's latest quarter. Excluding the effect of acquisitions, revenue rose 16%, per a company press release.

• Revenue in the Americas was up at the conglomerate's four biggest brands: 14% at Vans; 13% at the North Face; 21% at Timberland; and 9% at Dickie's. Net income rose 119% year over year to $89.5 million, pushing into the black after a nearly $484 million loss a year ago. 

• The conglomerate is selling more of its own goods and less via retailers. Direct-to-consumer sales were up 36% in the quarter, with e-commerce up 106%. This year the company expects direct-to-consumer revenue to increase between 38% and 40%, including digital growth of between 29% and 31%.

Dive Insight:

After taking a hit during the pandemic, in part due to temporary store closures and inventory snafus but also to lifestyle changes, Vans is making a comeback, CEO Steve Rendle told analysts Friday morning. That will continue as stores reopen in Europe, where in some areas locations remain closed due to the pandemic.

"As we think about this year, as those stores reopen, the upside could be very significant," he said. "And we know that [stores] are a very powerful part of the connection to their consumers. This is where we really have a distinct competitive advantage. We have a higher loyalty member engagement."

As sales of office garb and formalwear fell further during the height of the pandemic (and may not recover much), casual styles like Vans seemed to have an advantage. But kids were stuck at home, and footwear sales skewed toward the athletic, and both trends hurt Vans, according to Jane Hali & Associates analyst Jessica Ramírez. Now trends may shift back to lifestyle fashion. And kids (and others) need new shoes.

"In apparel, we expect there to be replenishment in general, aside from pent-up demand," Ramírez said by phone. "Even if people aren't fully shopping yet, there's a need for replacements and sneakers is one of them —outside of the running sneakers that people bought last year."

The company's inventory management push during the quarter cost it. Gross margin contracted by 100 basis points to 52.1%, primarily driven by elevated promotional activity to clear excess inventory and the timing of net foreign currency transaction activity. 

"Anytime you're running lean inventories, that's probably a positive — now the potential negative is if demand picks up more than you think," Edward Jones analyst Brian Yarbrough said by phone. "With all the supply chain issues and bottlenecks we're seeing right now, it's going to be more difficult to meet at-once orders if demand really picks up. But they had way too much inventory, and from an investor standpoint, I'd rather see them miss out on sales. Because anytime you're clearing goods, that puts in the consumer's mind, 'Well why should I pay full price because eventually this will go on sale.'"

Whereas the North Face has benefitted from the popularity of outdoor activities last year, and Vans is on the upswing, Timberland remains a disappointment, according to Yarbrough. But overall the company's management of its portfolio, which has entailed both acquisitions (like last year's Supreme purchase) and pruning (most recently of nine workwear brands), has been mostly sound.

"No doubt, bigger picture, we like the story, because the fastest growing brands are their highest margin brands," Yarbrough said. "One, they have the highest profitability. Two, the fastest growing region, China, has higher profitability than the U.S. and Europe. And, three, more and more of the business is switching over to their own dotcom websites, which is higher margin. So we like the profile of where the growth is coming from."