), one of the largest apparel retailers in the world, revealed
its major initiatives and strategies to boost shareholder returns
at an investor meeting held in New York City. The company
announced its key financial targets for 2017 that are expected to
drive strong cash flow, which should in turn support
acquisitions, dividends and share repurchases.
As part of its key financial targets, V.F. Corp. expects to drive
revenue to $17.3 billion by 2017, recording a 5-year compounded
annual growth rate (CAGR) of 10%, including 8% organic growth and
2% growth from acquisitions. Earnings per share through 2017 are
targeted to reach $18.00, reflecting a 5-year CAGR of 13%.
Additionally, the company elevated its forecasts for gross and
operating margins on the back of exceptional growth witnessed at
its Outdoor & Action Sports, direct-to-consumer and
international businesses. The company now expects gross margin to
jump 300 basis points to 49.5% in 2017 from 46.5% in 2012.
Operating margin for 2017 is expected to grow to 16%, expanding
250 basis points from 13.5% in 2012.
This growth in the company's margins is expected to result in
annual cash flow from operations escalating to $2.4 billion by
2017, with a cumulative cash flow generation of $9.5 billion in
between 2013 and 2017. Based on such strong cash flow
projections, the company expects dividend payout rate of 40%,
annual total shareholder return in excess of 15% and return on
invested capital of 20% by 2017.
Moreover, V.F. Corp. outlined its growth targets for various
segments and brands at the meet. The company also stated that it
expects the Outdoor & Action Sports segment to be the key
growth driver in the coming years.
Outdoor & Action Sports
segment, the company projects revenue to reach $11.1 billion by
2017, contributing 64% to VF's total revenue in 2017, surging
from 54% contributed in 2012. The growth in segment revenue will
represent a 14% 5-year CAGR, including 11% organic growth and 3%
growth from acquisitions. Geographically, all key regions are
expected to remain strong over the next 5 years with 12% growth
in the Americas, 13% growth in EMEA and 24% growth in the
The company also provided 5-year growth targets for the largest
brands of the Outdoor & Action Sports segment, projecting 12%
annual growth rate and revenue of $3.3 billion for
The North Face
brand; 15% annual growth rate and revenue of $2.9 billion for
brand and 10% annual CAGR and revenue of $2.3 billion for
Jeanswear & Imagewear
, the company targets revenue of $3.3 billion by 2017, as it
continues to strive for excellence through product innovation.
This should bring in a 5-year CAGR of about 4% for the segment.
Additionally, the company highlighted that this segment will gain
mainly from the Asia-Pacific region in the next five years, with
revenue expected to grow at a 12% annual rate. Focusing on the
brands, the company expects its
brands to register annual growth rates of 5% and 3%,
respectively, over the next 5 years. The segment's other brands
are collectively expected to take the revenue figure to $1.3
billion by 2017, with a compounded annual growth rate of 4%.
Revenue at V.F. Corp's
segments are each expected to grow at an 8% 5-year CAGR, reaching
$835 million and $645 million, respectively, by 2017. Revenue for
the Sportswear segment is expected to rise mainly on the growth
momentum at its Nautica and Kipling brands. The company
brand to drive revenue to $700 million by 2017, carrying a 7%
CAGR. In the Contemporary Brands segment,
7 For All Mankind
, is expected to drive revenues to $400 million by 2017,
delivering an average annual growth rate of 8%.
Further, the company identified that its
business will be a significant contributor to its growth over the
next 5 years, accounting for about 25% of total revenue by 2017,
up from 21% contributed in 2012. Revenue at the division is
expected to reach $4.4 billion by 2017, primarily driven by new
store openings with strong international expansion, accelerated
e-Commerce growth and continuous comp store increases. This will
represent a 14% CAGR for the division.
Moreover, the company is expected to add about 645 DTC stores in
the next 5 years, bringing the total store count to 1,775. The
company also projects a 25% annual revenue growth rate in
e-Commerce over the next 5 years. Revenue growth CAGRs across the
DTC regions is expected to remain robust with 12% growth in the
Americas, 21% in EMEA and 15% in the Asia-Pacific.
front, the company projects revenue of $7.4 billion by 2017,
representing about 43% of total revenue along with a 5-year CAGR
of 13%. Region-wise, the company projects CAGRs of 17% in the
Asia-Pacific, 15% in the Americas (non-U.S.), and 11% in EMEA.
We believe the strategies and targets outlined in the meeting
along with V.F. Corp's diverse brand portfolio, its approach to
brand management, a proven strategy, an excellent operating team
and competitive advantages position it for significant growth in
the long term. With these targets, the company should
successfully deliver consistent value for both consumers and
shareholders, presently and going forward.
V.F. Corp. currently has a Zacks Rank #3 (Hold). However, other
stocks performing well in the apparel retail industry include
Michael Kors Holdings Limited
Joe's Jeans Inc.
). Hanesbrands carries a Zacks Rank #1 (Strong Buy), while
Michael Kors and Joe's Jeans have a Zacks Rank #2 (Buy).
HANESBRANDS INC (HBI): Free Stock Analysis
JOES JEANS INC (JOEZ): Free Stock Analysis
MICHAEL KORS (KORS): Free Stock Analysis
V F CORP (VFC): Free Stock Analysis Report
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