Why Could Some of VFC’s Segments Face Sales Headwinds?



Challenged segments

VF Corporation (VFC) expects sales headwinds from its Imagewear, Sportswear, and Contemporary Brand segments to impact its 4Q15 and 2015 results. Imagewear includes sales of uniforms and occupational apparel. It was hit hard by the slowdown in the energy sector.

Sales from Sportswear have been impacted negatively by closures of some directly operated stores and weak store traffic trends. Sales for Nautica were challenged. The company’s Kipling brand sales bucked the trend. US sales rose by 10% in the first nine months of 2015.

VFC’s Contemporary Brand segment includes premium denim brand “7 For All Mankind.” Its sales fell by 12.3% in the first nine months of 2015. The segment was hit by weak demand. It was partially due to a shift in consumer preferences for athleisurewear.

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How are VFC’s peers faring?

Some of VFC’s apparel peers are projecting faster growth. Athleisurewear player Lululemon Athletica (LULU) expects fourth quarter sales to grow by ~15%. The company revised its revenue and earnings guidance upwards last month due to a better-than-expected 2015 holiday season[1. Based on comments by Laurent Potdevin, CEO of Lululemon Athletica].

Recently, L Brands (LB) reported record sales for the fourth quarter ending on January 30, 2016. The reported sales (RXI) rose by 8% to $4.4 billion. The same-store sales growth came in at 6%. It also raised its full-year earnings per share guidance for fiscal 2016.

Some of the reasons that VFC’s sales are growing slower than its peers include its diverse brands portfolio, decade-old brands, and currency factors.

Together, VFC, L Brands, and Lululemon Athletica account for 0.23% of the holdings in the iShares Russell 3000 ETF (IWV). IWV provides exposure to 3,000 US stocks.

In the next part, we’ll discuss VFC’s earnings and profitability expectations in 4Q15 and 2015.


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