V.F. Corporation
's (
VFC
) wholly-owned skateboarding footwear brand, Vans, recently
announced its plan to enter the athletic footwear segment, posing a
threat to
Nike Inc.
(
NKE
), the leader in athletic footwear segment. The company intends to
introduce five new LXVI line of footwear at selected
Foot Locker Inc.
's (
FL
) 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.
FOOT LOCKER INC (FL): Free Stock Analysis
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V F CORP (VFC): Free Stock Analysis Report
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