V.F. Corporation (VFC) has been a shining star in the stock market lately, rewarding investors with a remarkable 31.7% gain over the past three months. This impressive performance outpaces the industry’s decline of 3.5% and even surpasses the S&P 500’s 4.4% growth. What’s driving this surge in VFC’s stock? The answer lies in the company’s strategic initiatives, particularly its Reinvent transformation program and cost-reduction efforts.
One of the key factors contributing to VFC’s recent success is its focus on stabilizing gross margins. Although the company faces near-term uncertainties, it is encouraged by sequential improvements in sales at Vans, a crucial brand within VFC’s portfolio. While overall sales haven’t yet returned to positive territory, this improvement is a promising sign. The stock’s closing price of $18.65 places it close to its 52-week high of $20.69, touched in December 2023, highlighting the strong upward momentum.
Furthermore, the stock’s current level represents a premium of 70% from its 52-week low. Technical indicators show that VFC is trading above both its 50 and 200-day moving averages, further reinforcing the strong upward momentum and sustained investor confidence in the company’s performance.
V.F. Corp’s Reinvent Transformation: A Catalyst for Growth
V.F. Corp remains committed to its Reinvent transformation program, focusing on brand-building and improving operational efficiency. This comprehensive plan targets four key objectives:
* Enhancing North American performance
* Revitalizing the Vans brand
* Reducing costs
* Strengthening the balance sheet
As part of this plan, V.F. Corp continues to streamline processes and invest in initiatives designed to drive brand demand and boost growth. In the first quarter of fiscal 2025, the company generated $50 million in cost savings through the Reinvent program. This large-scale cost-reduction program is projected to deliver $300 million in fixed cost savings by reducing expenditure in non-strategic areas and simplifying its structure in the first half of fiscal 2025.
A Strategic Shift: Divesting Supreme
V.F. Corp’s decision to sell the Supreme brand marks a significant shift, aiming to refocus on its core business and improve operational efficiency. The company recognizes that Supreme lacked synergy with its broader portfolio, leading to its divestiture. This move will help V.F. streamline its operations and enhance financial flexibility by reducing leverage.
A Promising Outlook for VFC Stock
V.F. Corp is poised to benefit from its growth plan for fiscal 2023-2027. The company expects revenues to experience a mid-to-high single-digit CAGR (Compound Annual Growth Rate) and earnings to record a high single to low double-digit CAGR. By fiscal 2027, V.F. Corp projects an operating margin of 15%, driven by gross margin expansion and lower SG&A (Selling, General, and Administrative) expenses.
Vans: A Key Driver for Recovery
Central to V.F. Corp’s recovery strategy is the revitalization of the Vans brand, which has faced challenges in recent years. Analysts are optimistic, forecasting that the company will begin to see gradual improvements in its fundamentals over the next four to six quarters. While it is too early to declare a complete turnaround, 2025 could potentially mark a turning point for Vans, which is critical to V.F. Corp’s broader recovery efforts.
Near-Term Concerns for VFC Stock
V.F. Corp’s first-quarter fiscal 2025 results were impacted by a challenging operating environment and weak performance across regions, channels, and brands. This led to a 9% year-over-year decline in sales and an 8% decline in constant currency. While there was sequential improvement, V.F. Corp continues to face challenges with its well-known brands, The North Face and Vans. Both brands, once reliable revenue drivers, are experiencing declining sales and struggling to connect with their core customer bases.
The North Face is grappling with shifting consumer preferences and heightened competition in the outdoor apparel market. The brand has found it difficult to maintain its premium positioning while attempting to appeal to a broader audience. Vans, meanwhile, is dealing with a saturated sneaker market and a decline in its appeal among younger customers. However, V.F. Corp has a recovery strategy in place, and expectations are for improvement in the near term.
Top Picks in the Consumer Discretionary Sector
While VFC currently carries a Zacks Rank #3 (Hold), there are other well-ranked stocks in the Consumer Discretionary space worth considering.
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Wolverine World Wide (WWW):
This company designs, manufactures, and distributes a wide variety of casual and active apparel and footwear. With a Zacks Rank #1 (Strong Buy), WWW is a solid contender.*
G-III Apparel Group (GIII):
As a manufacturer, designer, and distributor of apparel and accessories under licensed brands, owned brands, and private label brands, G-III Apparel also boasts a Zacks Rank #1 (Strong Buy).*
Steven Madden, Ltd. (SHOO):
Known for its fashion-forward name-brand and private-label footwear, Steven Madden holds a Zacks Rank #2 (Buy) and offers potential for growth.V.F. Corporation’s journey is one of transformation and adaptation. The company’s Reinvent program and strategic adjustments are laying the foundation for a brighter future. While challenges remain, VFC’s recent momentum and positive signs suggest that the company is on the right track to regaining its strength and delivering value to investors.
