V.F. Corporation - NYSE:VFC - Comprehensive analysis
Shares of VF, the owner of The North Face, Timberland, Vans, and eight other brands, are currently trading at approximately a 70% discount to our valuation, following a sharp decline due to tariff concerns. We assess the firm as having no economic moat, as Vans and several other key brands have faced challenges since the pandemic. Nevertheless, VF remains one of the largest apparel companies in the US and operates in appealing market segments. In response to these challenges, CEO Bracken Darrell is executing a strategy to revamp Vans, launch a new platform in the Americas, cut costs, and manage debt more effectively. Over the past year, VF has reduced its debt by $1.9 billion to $4.7 billion, partly due to the anticipated 2024 sale of Supreme for $1.475 billion in cash. We believe VF’s reduced valuation offers an investment opportunity in a company that is positioned for enhanced profitability. Its adjusted operating margin was a disappointing 4.5% in fiscal 2024, but it is on an upward trajectory. We project that it will eventually return to annual double-digit margins within approximately three years, driven by more stable sales from Vans and other brands, cost reductions, and additional initiatives. During its October 2024 investor event, VF established reasonable fiscal 2028 targets, including an adjusted operating margin of at least 10%, an adjusted gross margin of at least 55%, an adjusted selling, general, and administrative margin of 45% or less, and net leverage of 2.5 times or below. VF has attracted the attention of activist investors advocating for significant changes, such as cost reductions and the divestiture of noncore brands. Darrell is implementing many of these changes, although it seems the company plans to retain its remaining brands for the time being. Ultimately, we believe that Dickies and some other brands may be sold in the future.
Free evaluation through quantitative algorithms V.F. Corporation - NYSE:VFC
Growth-Scoring Model Detail
Total Revenue Growth Over Prior Year | -2.51 | Market 16 Sector 41 |
Gross Profit Growth Over Prior Year | -1.16 | Market 22 Sector 35 |
EBITDA Growth Over Prior Year | -13.95 | Market 8 Sector 25 |
EBITA Growth Over Prior Year | -16.68 | Market 9 Sector 26 |
EBIT Growth Over Prior Year | -18.46 | Market 10 Sector 25 |
Earnings from Cont. Ops. Growth Over Prior Year | 0 | Market 0 Sector 0 |
Net Income Growth Over Prior Year | 0 | Market 0 Sector 0 |
Normalized Net Income Growth Over Prior Year | -39.96 | Market 3 Sector 16 |
Diluted EPS before Extra Growth Over Prior Year | 0 | Market 0 Sector 0 |
A/R Growth Over Prior Year | 2.21 | Market 46 Sector 55 |
Inventory Growth Over Prior Year | -16.46 | Market 3 Sector 17 |
PPE Net Growth Over Prior Year | -10.81 | Market 11 Sector 17 |
Total Assets Growth Over Prior Year | -16.35 | Market 4 Sector 15 |
Tangible Book Value Growth Over Prior Year | 0 | Market 0 Sector 0 |
Common Equity Growth Over Prior Year | -20.34 | Market 6 Sector 14 |
Cash from Ops. Growth Over Prior Year | -57.53 | Market 0 Sector 16 |
CAPEX Growth Over Prior Year | -36.39 | Market 8 Sector 17 |
Dividend per Share Growth Over Prior Year | -63.64 | Market 2 Sector 3 |
Levered Free Cash Flow Growth Over Prior Year | -35.2 | Market 11 Sector 39 |
Unlevered Free Cash Flow Growth Over Prior Year | -28.56 | Market 13 Sector 41 |
Profitability-Scoring Model Detail
Gross Margin % | 53 | Market 74 Sector 77 |
SG&A Margin % | 47.2 | Market 97 Sector 83 |
EBITDA Margin % | 8.22 | Market 19 Sector 47 |
EBITA Margin % | 5.68 | Market 19 Sector 50 |
EBIT Margin % | 5.44 | Market 19 Sector 49 |
Earnings from Cont. Ops Margin % | -1.41 | Market 5 Sector 29 |
Net Income Margin % | -4.51 | Market 4 Sector 18 |
Net Income Avail. for Common Margin % | -1.41 | Market 5 Sector 29 |
Normalized Net Income Margin % | 1.94 | Market 9 Sector 46 |
Levered Free Cash Flow Margin % | 6.18 | Market 40 Sector 67 |
Unlevered Free Cash Flow Margin % | 7.66 | Market 46 Sector 73 |
Return on Assets % | 2.98 | Market 14 Sector 42 |
Return on Capital % | 4.09 | Market 14 Sector 41 |
Return on Equity % | -7.54 | Market 6 Sector 25 |
Return on Common Equity % | -7.54 | Market 6 Sector 25 |
Total Asset Turnover | 0.88 | Market 50 Sector 24 |
