After a long winter that will be remembered for a remarkable
amount of snowfall here in the northeast, it appears that spring
has finally arrived in Vermont. The last of the snow finally melted
in most places before Easter.
Now is the time of year when many of us unpack our spring and
summer clothes, tune up our bikes, and prepare our boats for the
water. And it's the time of year when we again consider what new
items we need to buy in order to enjoy our many outdoor hobbies.
The U.S. economy continues to improve on a national level, with
unemployment at 9 percent and the economy adding roughly 240,000
jobs last month. Here in Vermont, the jobs picture is even
brighter, with unemployment far below the national average at just
With unemployment continuing to fall, many people are now
feeling more secure in their jobs. This combined with a continued
rise for the stock market has created a "wealth effect" - this
means that people feel better-off due to the increase in their
investment and retirement accounts.
When people feel more secure in their jobs and wealthier, they
tend to spend more. For example, in March consumer spending inched
up one-half percentage point. This slow return to increased
consumer spending is positive news for retailers.
Companies that make outdoor apparel and other
sporting-related merchandise seem to be cashing in on the
return of the post-recession consumer.
Most people are familiar with many of the brands we associate
with outdoor apparel and gear, including K2, North Face, Patagonia
and REI. However, you'll have trouble getting a stock quote for any
of these companies because none of them are publicly traded. Some
remain privately held companies, while others have been bought up
by holding companies that own multiple brands focused on selling to
For investors, this makes it a little more difficult to find
potential opportunities for investment, since there are limited
stand-alone sporting companies that are publicly listed on a stock
My search for compelling outdoor stocks began with a focus on
companies with a primary business in outdoor apparel or equipment,
including manufacturers and retailers. I was ultimately looking for
a high quality outdoor company with the potential for financial
growth that will reward shareholders in the years to come.
Until very recently,
I had never heard of
V.F. Corp (NYSE: VFC).
The North Carolina outdoor apparel company is largely unknown and
unheard of among consumers and investors alike. It's no longer a
small cap, but its dividend, still relatively small size (around
$10 billion market cap), and growth prospects make it very
attractive. And if you're someone who enjoys the outdoors, I would
be willing to bet that you own something made by this company.
makes active apparel, denim, and daypack products under 30
well-recognized brands including Lee, JanSport, Nautica, The North
Face, Vans, and Wrangler. The company designs and manufactures
products under these and other lifestyle brands both in the U.S.
Since being founded in 1899,
has expanded and matured over the years. A primary driver of the
company's historic growth has been acquisitions of leading brands,
including Lee Jeans and many other brands the company owns today.
Over the next five years, V.F Corp plans to grow its sales by 10
percent annually, from $7.7 billion last year to over $12.7 billion
by 2015. Earnings per share are expected to increase at a more
rapid pace of 12 percent annually, according to management.
Moving forward, the company expects a large portion of its
growth to come from international sales, including emerging market
countries like Brazil, China, India, and Mexico. While V.F. remains
headquartered in the U.S., over 30 percent of its sales today come
For investors, international exposure is likely to help fuel the
growth in the company as the expansion the middle to upper classes
in the developing world grows. In addition to growth overseas, V.F.
plans to sell more products directly to consumers, largely through
its 780 existing and new storefronts, and online.
The future appears bright for V.F., and past performance
indicates that management is likely to deliver on its promises to
shareholders. Last year, sales rose seven percent and full year
adjusted earnings per share (
) increased 25 percent.
These strong results led to positive cash from operations of
over $1 billion last year, and allowed the company to increase its
quarterly cash dividend. With the dividend currently at $2.52 on an
annual basis, the yield from this stock is a healthy 2.6 percent.
Income investors should also note that since the company began
paying a dividend back in 1986, it has never reduced or eliminated
its dividend. Such performance over a 25-year period is enviable.
With shares of
V. F. Corp (NYSE: VFC)
currently trading just under $100, this outdoor stock is valued at
14-times 2011 earnings estimates. It appears that shares are
undervalued relative to the stock market as a whole. For investors,
there is likely upside to the stock as the management team
continues to execute on its growth plans.
Just recently S&P reiterated its Strong Buy rating on V.F.
shares, and increased its price target to $120 per share. S&P
V.F. Corp (NYSE: VFC)
shares will rise in 2011 due to strong financial performance and
believes shares are undervalued based on the current
This spring, lovers of the outdoors might benefit from investing
in shares of V.F., which could see its shares rise by 20 percent in
the next year according to S&P. And for income investors,
they'll find the added bonus of a healthy 2.6 percent cash