February 22, 2011 / 12:31 PM / 9 years ago

UPDATE 4-VF Corp to raise prices, capex; shrs at life-high

* Q4 adj EPS $1.78 vs est $1.65

* Sees 2011 profit above Wall St estimates

* Plans to raise prices as cotton costs increase

* To boost capex - mainly on buildings, space

* Shares up as much 12 pct to life high (Rewrites, adds details, share move)

By Nivedita Bhattacharjee

Feb 22 (Reuters) - Apparel maker VF Corp said it will raise prices to protect its margins against the higher cost of raw materials like cotton, and will almost double its capital spending, largely on more space to support its growing businesses.

Shares in VF Corp, which traces its roots back as far as 1899 and the Pennsylvania-based Reading Glove and Mitten Manufacturing Company, jumped as much as 12 percent to a life high of $100.24 on Tuesday on the New York Stock Exchange.

“2011 is to be a year of higher spending ... for 5 years we’ve spent around $120 million on average and this year we expect to spend about $225 million,” Chief Financial Officer Robert Shearer told Reuters.

Much of that increase will go on facilities and distribution centres, as well as the headquarters for the outdoor and action sports segment, the company’s biggest business, accounting for 42 percent of sales.

VF Corp, which makes brands like North Face, Vans, Lee jeans and 7 For All Mankind, said 2011 would see the highest rate of organic revenue growth since 2007.

It forecast 2011 earnings of $7.00-$7.10 a share, just ahead of analysts’s predictions for $6.79, according to Thomson Reuters I/B/E/S.

Shearer said overall product costs would increase by around 7 percent this year, mainly driven by higher cotton prices, which have prompted clothes manufacturers worldwide to raise prices and safeguard their margins.

Last month, Hanesbrands Inc said it would increase prices sharply, while Swedish fashion chain Hennes & Mauritz AB posted a surprise fall in quarterly profit, hit by higher raw materials costs.

VF Corp’s price increases will be introduced throughout the year, and would particularly affect its domestic jeans wear business.

However, the increases will not entirely offset pressure from higher input costs, and the company is looking to its high-margin action wear and international sales to prop up margins.

Gross margins should dip by less than 1 percentage point in 2011, the company said.

Over the long term, international sales are expected to grow to 40 percent of sales, from 30 percent now.

Greensboro, North Carolina-based VF Corp posted October-December net income of $54.2 million, down from $66.9 million a year earlier. On an adjusted basis, it earned $1.78 a share, while analysts, on average, had expected earnings of $1.65 a share, according to Thomson Reuters I/B/E/S.

Revenue at the company, whose peers include Nike Inc and Levi Strauss & Co, rose 11 percent to $2.13 billion, beating analysts’ forecasts for $2.03 billion. (Reporting by Nivedita Bhattacharjee; Editing by Jarshad Kakkrakandy)

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