VFC - V.F. Corp.: Is Its Deleveraging Plan Realistic?
2024-03-26 12:35:14 ET
Summary
- VFC stock has experienced a significant decline over the years, falling 86% from its all-time high. It is facing significant challenges with its brand portfolio and suffers from excessive debt.
- In this update, I take a fresh look at VF Corp's business to see if the situation is still manageable or if the challenges have become overwhelming.
- After all, The North Face - the only bright spot at VFC for some time - has also disappointed recently.
- I will be paying particular attention to deleveraging and asset sales, especially considering that Moody's downgraded V.F. Corp to the lowest investment grade rating in November 2023 and maintained the negative outlook.
Introduction
Shares in apparel and footwear company V.F. Corporation ( VFC ) are undoubtedly not for the faint-hearted. VFC stock has fallen 86% since its exuberant all-time high of $100 reached before the outbreak of the pandemic in early 2020 and is now trading at levels last seen right after the Great Recession or before 2006.
As I pointed out in one of my earlier articles , when VFC stock was still trading well above $60 per share, I never really understood the valuation premium. Of course, VF has solid brands and is quite diversified for an apparel company, but given that debt was largely the only thing growing at VFC over the years, caution was warranted. The lockdowns during the pandemic and the subsequent supply chain issues acted as a fire accelerant, so to speak, creating a cash flow vacuum that made VFC's already high debt levels seem increasingly difficult to manage. Add to that the acquisition of Supreme at an irresponsibly high multiple in 2020 and later the $876 million payment related to a tax dispute concerning the Timberland acquisition in 2011, and it's easy to understand why the company had to cut its dividend after nearly 50 years of uninterrupted growth. In fact, VFC has cut its dividend twice - first by more than 40% in February 2023 and half a year later by another 70% to $0.36 annually....
V.F. Corp.: Is Its Deleveraging Plan Realistic?