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VF Corp's Comeback Story: Supreme Sale and Cost Cuts Boost Stock

By: MarketBeat

September 10, 2024 at 08:15 AM EDT

Photo of a North Face retail store. North Face is a popular brand under VF Corp. Global apparel and footwear company VF Corp. (NYSE: VFC) has been working on its turnaround spearheaded by its current CEO, Bracken Darrell, who was appointed in July 2023. Darrell was the former CEO of Logitech International S.A. (NASDAQ: LOGI) and was credited for executing the company's turnaround.

VF Corp owns a portfolio of well-known brands, including The North Face, Vans, Timberland, and Dickies. The stock has performed relatively well, surging up to $19.00 from its $11.00 lows in May 2024. The company is still losing money, but signs of stabilization are showing up. VF Corp shrank its inventories by 24% in its fiscal first quarter of 2025 and is making progress on its Reinvent turnaround strategy.

VF Corp. is a consumer discretionary sector company competing with outdoor apparel and footwear companies like Columbia Sportswear Co. (NASDAQ: COLM), Canadian Goose Holdings Inc. (NYSE: GOOS), and Deckers Outdoor Co. (NYSE: DECK).

Assembling the Turnaround Team

As part of its turnaround plan, VF Corp assembled a team of industry professionals, including:

Paul Vogel: Appointed as the new CFO; previously CFO at Spotify Technology S.A. (NYSE: SPOT) from January 2020 to March 2024
Nina Flood: Promoted to head of Timberland six months ago
Caroline Brown: Named president of The North Face two months ago; formerly Managing Director at Closed Loop Partners and CEO of Donna Karan International and DKNY
Chris Stutzman: Joined as Chief Design Officer (CDO); came from Logitech, where he held the same position
Abhishek Dalmia: Appointed as Chief Strategy & Transformation Officer; was a Managing Director at BCG and previously held executive roles at Lululemon Athletica Inc. (NASDAQ: LULU) and Dell Technologies Inc. (NYSE: DELL)
Sun Choe: Appointed as Global Brands President of Vans in June 2024; was the Chief Product Officer (CPO) at Lululemon from 2018 to 2024.

Operating a Portfolio of Iconic Brands

VF Corp operates 11 iconic lifestyle brands: The North Face, Vans, Timberland, Dickies, Supreme, Altra, Icebreaker, Smartwool, Napapijri, Eastpak, and JanSport.

The company is in the process of divesting its 12^th brand, Supreme, for $1.5 billion to EssilorLuxottica. The deal will be closed in Q4 2024. VF is currently undergoing a strategic review of all its brands and is considering divesting more of them.

The Reinvent Turnaround Strategy

The Reinvent strategy is comprised of four key priorities:

1. Improve North American Results

This entails reorganizing the operating model by establishing a global commercial structure that includes a new regional platform concentrated on the Americas. Investment will be focused on brand-building marketing activities to help drive consumer demand.

2. Accelerate VANS Turnaround

VF plans to revitalize the VANS brand and reignite consumer interest. VANS experienced strong growth during the pandemic, but pulling forward demand resulted in an inventory glut. To accomplish this, VF will focus on innovative products and marketing.

3. Reduce Costs

VF Corp wants to eliminate $300 million in fixed cost savings. This can be accomplished by reducing spending on non-strategic areas, right-sizing the organization, and streamlining operations.

4. Strengthen the Balance Sheet

Debt reduction is a priority for VF. The company is working on accomplishing this through various measures, including asset sales (such as selling the Supreme brand) and improving cash flow. VF must ensure adequate liquidity to support growth initiatives and has initiated a strategic review of all its brands.

Fiscal Q1 Report: VF Gaining Traction

VF Corp reported a fiscal first-quarter 2025 EPS loss of 33 cents, beating consensus estimates by four cents. Revenues fell 8.9% YoY to $1.9 billion still beating consensus estimates for $1.85 billion.

The North Face revenue fell 3% YoY, with global brand direct-to-consumer (DTC) up 6% inclusive of broad-based DTC growth in all regions, more than offset by U.S. wholesale. VANS revenue fell 21% YoY, which was still a modest sequential improvement from being down 27% in the previous quarter.

The company’s ending inventories dropped an impressive 24% YoY to $676 million. Net debt dropped by nearly $587 million relative to the prior year. VF Corp generated a further $50 million in cost savings in the quarter, part of its goal of $300 million. VF Corp is reinvesting that back into the company.

VF Reiterates Fiscal Full Year 2025 Outlook

VF reiterated fiscal full-year 2025 guidance and expects to raise another $600 million from selling non-core physical assets, excluding the impact of Supreme. Supreme will be reported as discontinued beginning in fiscal Q2 2025.

"As I complete my first year at VF, I feel more energized than ever. While the business is still down, the rate of decline moderated quarter-over-quarter versus Q4 and across almost all our brands. We advanced further on the Reinvent transformation plan," CEO Bracken Darrell said.

VFC Stock Forms an Ascending Triangle Pattern

An ascending triangle pattern comprises a flat-top horizontal upper trendline resistance converging at the apex point with an ascending lower trendline support.

Photo of stock chart illustrating VFC Stock Forming an Ascending Triangle Pattern

VFC commenced the ascending trendline at $14.70, representing higher lows. The daily anchored VWAP support sits at $16.69. A candle closed under the rising trendline, which could indicate a potential failure if it doesn't recover back up through the $18.22 level. The daily relative strength index (RSI) is falling to the 54-band. Fibonacci (Fib) pullback support levels are at $16.66, $15.56, $14.95, and $14.51.

VFC Corp’s average consensus price target is $15.56, and its highest analyst price target sits at $20.00.

The market has been very bullish on VFC's turnaround, too bullish as it may have gotten ahead of itself since the average consensus price target sits lower at $15.56. Bullish investors should still wait patiently for pullbacks and can consider using cash-secured puts at the fib pullback support levels. A wheel strategy can be executed by writing covered calls after being assigned to generate income on top of the 1.91% annual dividend yield and provide a buffer against a deeper pullback. VFC stock has an 11.52% short interest.

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