VF Corp (NYSE: VFC) is an apparel manufacturer. It provides products under the names: The North Face, Timberland, Smartwool, Icebreaker, Altra, Vans, Supreme, Kipling, Napapijri, Eastpak, JanSport and Dickies.
VF Corp has had impairment charges in 2 of the last four quarters relating to Supreme. VF reported its quarterly results today, taking a big hit from a tax case involving Timberland. Without these incidents, the company would have turned a profit. Its most important brand, Vans, has been steadily declining over the past few years. In Q2 FY2024, Vans revenue slumped by 21% from the same period last year. Timberland and Dickies were also down by 7% and 8% respectively. Only Northface and “other brands” have grown.
From Q4 FY2021, “By segment, revenue for Outdoor is expected to increase between 23 percent and 25 percent; revenue for Active is expected to increase between 34 percent and 36 percent; and, revenue for Work is expected to increase between 10 percent and 12 percent.” Since this prediction was made, only the Outdoor segment has increased its sales, driven mainly by the performance of North Face.
Market cap: $5bn
Long term debt: $5,7bn
Goodwill and other intangible assets: $4.6bn
Highly indebted with flat or declining revenue streams, as well as fading brands, I think VF Corp is going to have to sell parts of its business or take a writedown, possibly to its Vans brand.
I do not own shares of VF Corp.
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The price of money that balances savings and investment while keeping inflation stable is called ‘the natural rate of interest’. This rate has slowly declined over the past 50 years along with 10-year bond yields. Now it is rebounding from its low. The era of cheap debt is over, according to some economists. Outbreaks of war, the transition to green energy, lower GDP and productivity growth, ageing populations, government debt, higher interest rates are all factors that relate to the recent rise of the natural rate.
Devlin Demontigny 