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V.F. Corp (VFC) Surges on Potential Sale of Denim Brands
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Shares of V.F. Corporation (VFC - Free Report) have witnessed an upsurge on Aug 10 after a news source revealed that this owner of more than 20 brands is evaluating strategic alternatives (including a sale or spin-off) for its popular denim brands – Lee and Wrangler. The company’s shares hit the 52-week high mark of $97 per share, closing a notch lower at $96.29, as the news did the rounds on Friday.
The classic American denim brands have been a part of V.F. Corp’s portfolio for more than a decade. These brands were once the core brands of the company before it shifted focus to diversifying its brands. However, with time and numerous acquisitions made lately, the Vans, The North Face and Timberland brands have emerged as V.F. Corp’s core brands, contributing a larger share of its revenues.
To be precise, V.F. Corp’s Jeans segment is struggling due to the shift of its major customer, Wal-Mart (WMT - Free Report) toward its own private label brands. This has been increasingly weighing on the performance of the Lee brand. Further, the company has been losing on sales due to the rise of competition from Amazon (AMZN - Free Report) . These factors, alongside the maturing of the Jeans segment, have led to volatile sales for this segment for over a year.
Revenues for the Jeans segment increased 28% in first-quarter fiscal 2019, both on reported and constant-dollar basis. Meanwhile, organic revenues (excluding acquisitions) grew just 3%. Moreover, the company targets nearly flat revenues for the Jeans segment in fiscal 2019.
These numbers clearly reflect some parity with the overall industry trends. The jeans business in the U.S. has witnessed a considerable decline in recent years as women are preferring yoga pants over denims. Consequently, jeans sales of $16.2 billion in the U.S. in the last year marked a significant decline from $18.8 billion in 2013. In sync, the company raked in sales of nearly $2.66 billion for the Jeans division in 2017, with profits of about $422 million. This reflected a 5% decline in sales and 2% lower profits compared with 2015.
The investor community seems to have taken the news of the sale of these jeans brands positively, as is clear from the stock’s rally on Aug 10. Further, the company’s stock has been reflecting positive momentum over the past year, driven by the strength in its Vans brand as well as the international and direct-to-consumer businesses. Consequently, this Zacks Rank #3 (Hold) stock has surged 51.6% in a year, outperforming the industry’s increase of 38.2%.
Further, V.F. Corp is on track with its five-year strategic growth plan (2021 growth strategy), which focuses on rapidly responding to the changing marketplace while targeting fantastic shareholder returns. The strategy targets generating cumulative operating cash flows in excess of $9 billion in the five-year period between 2017 and 2021, and returning about $8 billion to shareholders in the form of dividends and share repurchases. Further, it anticipates five-year compounded annual revenue growth rate (CAGR) of 5-7% through 2021, aided by strong performance of the Vans, the North Face and Timberland (big three brands) as well as gains in the international and direct-to-consumer businesses. In 2021, earnings per share growth are expected to reach 11-13% at a five-year CAGR.
While V.F. Corp presents an attractive investment option, investors may also consider adding positions in Ralph Lauren Corporation (RL - Free Report) , which sports a Zacks Rank #2 (Buy). Further, the stock has rallied 60.7% in the past year and has a long-term earnings growth rate of 9.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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V.F. Corp (VFC) Surges on Potential Sale of Denim Brands
Shares of V.F. Corporation (VFC - Free Report) have witnessed an upsurge on Aug 10 after a news source revealed that this owner of more than 20 brands is evaluating strategic alternatives (including a sale or spin-off) for its popular denim brands – Lee and Wrangler. The company’s shares hit the 52-week high mark of $97 per share, closing a notch lower at $96.29, as the news did the rounds on Friday.
The classic American denim brands have been a part of V.F. Corp’s portfolio for more than a decade. These brands were once the core brands of the company before it shifted focus to diversifying its brands. However, with time and numerous acquisitions made lately, the Vans, The North Face and Timberland brands have emerged as V.F. Corp’s core brands, contributing a larger share of its revenues.
To be precise, V.F. Corp’s Jeans segment is struggling due to the shift of its major customer, Wal-Mart (WMT - Free Report) toward its own private label brands. This has been increasingly weighing on the performance of the Lee brand. Further, the company has been losing on sales due to the rise of competition from Amazon (AMZN - Free Report) . These factors, alongside the maturing of the Jeans segment, have led to volatile sales for this segment for over a year.
Revenues for the Jeans segment increased 28% in first-quarter fiscal 2019, both on reported and constant-dollar basis. Meanwhile, organic revenues (excluding acquisitions) grew just 3%. Moreover, the company targets nearly flat revenues for the Jeans segment in fiscal 2019.
These numbers clearly reflect some parity with the overall industry trends. The jeans business in the U.S. has witnessed a considerable decline in recent years as women are preferring yoga pants over denims. Consequently, jeans sales of $16.2 billion in the U.S. in the last year marked a significant decline from $18.8 billion in 2013. In sync, the company raked in sales of nearly $2.66 billion for the Jeans division in 2017, with profits of about $422 million. This reflected a 5% decline in sales and 2% lower profits compared with 2015.
The investor community seems to have taken the news of the sale of these jeans brands positively, as is clear from the stock’s rally on Aug 10. Further, the company’s stock has been reflecting positive momentum over the past year, driven by the strength in its Vans brand as well as the international and direct-to-consumer businesses. Consequently, this Zacks Rank #3 (Hold) stock has surged 51.6% in a year, outperforming the industry’s increase of 38.2%.
Further, V.F. Corp is on track with its five-year strategic growth plan (2021 growth strategy), which focuses on rapidly responding to the changing marketplace while targeting fantastic shareholder returns. The strategy targets generating cumulative operating cash flows in excess of $9 billion in the five-year period between 2017 and 2021, and returning about $8 billion to shareholders in the form of dividends and share repurchases. Further, it anticipates five-year compounded annual revenue growth rate (CAGR) of 5-7% through 2021, aided by strong performance of the Vans, the North Face and Timberland (big three brands) as well as gains in the international and direct-to-consumer businesses. In 2021, earnings per share growth are expected to reach 11-13% at a five-year CAGR.
While V.F. Corp presents an attractive investment option, investors may also consider adding positions in Ralph Lauren Corporation (RL - Free Report) , which sports a Zacks Rank #2 (Buy). Further, the stock has rallied 60.7% in the past year and has a long-term earnings growth rate of 9.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>