VFC VF Corporation

We maintain our ‘Outperform’ rating on V.F. Corporation (VFC). V.F. Corp.'s diversified brand portfolio positions the company well above its peers and generates above-average industry growth, a fact that is surely to see them through in the current challenging environment.

Moreover, the company’s approach to brand management allows each brand to develop further, through rigorous marketing strategies, financial control, and operating leverage. Further, given the strength of many of its brands and opportunities with regard to distribution, the company is set for significant long-term growth.

Additionally, V.F Corp.’s policy to acquire businesses with global growth opportunities and exiting businesses with less potential, has transformed the company, creating a strategic balance that drives growth and profit improvement. The acquisition of Rock and Republic Enterprises Inc. in the first quarter of fiscal 2011 will enable V.F. Corp. to compete in the premium-denim space dominated by Los Angeles designers.

Also, V.F. Corp. operates 25 manufacturing facilities, where the company benefits from decades of manufacturing and engineering expertise. The company’s consummate skill in manufacturing fetches many cost and service benefits.

A big plus for V.F. Corp. is its benefit of an extremely diversified and balanced base of over 1,500 contractors across 60 countries controlled from one of the biggest sourcing offices in Hong Kong, which provide tremendous scale and expertise. Given the strength of V.F. Corp.’s global supply chain, the company can rapidly adjust its sourcing strategies.

Furthermore, V.F. Corp.’s healthy cash flow and balance sheet allow it to make shareholder friendly moves, such as acquisitions, dividends, and share repurchases. Besides, the capital strength allows the company to continue to focus on international expansion, increasing the direct-to-consumer business, and investing in marketing of key brands, going forward.

V.F. Corp. holds a Zacks #1 Rank, which translates into a short-term Strong Buy recommendation. The company has the wherewithal to negotiate intense competition from other well-established players in the apparel industry, such as Polo Ralph Lauren Corp. (RL) and Sears Holdings Corporation (SHLD).

 
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