VFC - V.F. Corporation Is Speculative With Real Risks Of Permanent Capital Loss

2024-05-24 09:20:16 ET

Summary

• V.F. Corporation is an apparel conglomerate that owns well-known brands like The North Face, Vans, Timberland, Dickies, and Supreme.
• The company's stock is down 90% from its all-time high in 2019, thanks to bad capital allocation decisions made by the previous management team. Core brand sales are down 15/30%.
• The new management team is trying to restructure the company by selling non-core brands, repaying debt, and stopping the revenue hemorrhage from the core brands.
• I believe V.F. Corporation has meaningful permanent capital loss risks arising from a recession, the fashion cycle, and the refinancing of debt.
• However, the stock is also positioned for an already negative scenario, making it opportunistic for a recovery. Some readers might consider it a speculative buy.

V.F. Corporation ( VFC ) released 4Q24 earnings recently, leading to its stock price falling after missing top and bottom-line results. The earnings were very bad, with revenues at core brands falling 27% (Vans) and 15% (Timberland, Dickies). Accumulating restructuring, impairment, and clearance costs caused VFC to post unadjusted negative operating margins of 15% and a net loss of $400 million.

This is the first time I am covering VFC, an apparel brand conglomerate, owner of The North Face, Vans, Timberland, Dickies, Supreme, and other smaller brands like JanSport....

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