VFC VF Corporation

We maintain our long-term ‘Outperform’ recommendation on V.F. Corp (VFC).  

The company's diversified brand portfolio positions the company well above its peers to generate above-average industry growth and sustain itself in the current challenging environment. 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.

Moreover, V.F Corp.’s policy to acquire businesses providing strategic opportunities and exiting businesses having lower potential has helped the company to drive growth and improve profitability. 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.

The company also leverages its strong manufacturing and engineering abilities and related cost and service benefits for running manufacturing facilities for decades together. Apart from this, V.F. Corp. has the 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.

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

V.F. Corp. currently retains a Zacks #2 Rank, which translates to a short-term Buy rating. The major competitors of the company are Gap Inc. (GPS) and Sears Holdings Corporation (SHLD).

 
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