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V.F. Corporation’s (VFC - Analyst Report) wholly-owned skateboarding footwear brand, Vans, recently announced its plan to enter the athletic footwear segment, posing a threat to Nike Inc. (NKE - Analyst Report), the leader in athletic footwear segment. The company intends to introduce five new LXVI line of footwear at selected Foot Locker Inc.’s (FL - Snapshot Report) stores, Vans retail stores and select specialty lifestyle retailers.

The products, starting at a price of $70, will be launched globally at the end of June 2012. With special features such as lightweight and flexible structural design, the new line of footwear will be more comfortable and more attractive to action sports fans.

Acquired in 2004, Vans’ revenue has grown threefold. We believe V.F. Corp.’s policy to acquire businesses providing strategic opportunities and exiting businesses having lower potential has helped the company to drive growth while improving profitability. 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 its brand and opportunities with regard to distribution, the company is set for significant long-term growth. The company aims to add additional $1.0 billion to its brand revenue by the end of 2016, bringing the total to $2.2 billion. This represents an annualized revenue growth rate of 13%.

Vans anticipates 50% of additional targeted revenue to come from the American region. The brand, which mainly serves customers in the West Coast region of America, currently accounts for 70% of total brand revenue. The company intends to grow brand consciousness in major metropolitan areas such as New York City and Mexico City.

Further, the company is expecting its Europe/Middle East/Africa (EMEA) region to add $350 million in revenues and the Asia/Pacific (APAC) region to add $170 million by the end of 2016.

To achieve its target, V.F. Corp. is focusing on multi-channel retail sales, i.e. wholesale and direct-to-consumer. The company expects its wholesale business to grow by $565 million and direct-to-consumer business to add $435 million to total brand revenue by the end of 2016. The company is planning to add 200 more Vans stores over the period. Currently, the company operates 310 Vans retail stores.

Our Take

As one of the world’s largest apparel companies with over 30 brands, V.F. Corp. is well positioned to generate above average industry growth and sustain itself in the current challenging environment. The company maintains a diversified brand portfolio having a total market cap of $15.4 billion. The company’s top six brands are The North Face, Wrangler, Timberland, Vans, Lee and Nautica.

We expect V.F. Corp. to continue delivering on its potential, given the proven performance across its segments, its focus to build brand image via incremental marketing spending and its committed returns to shareholders by virtue of share buybacks and dividend payouts.

Currently, we are maintaining a long-term Neutral recommendation on the stock. Keeping pace with our long-term recommendation, V.F. Corp. currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

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