VF Corporation Plans to Sell Its Contemporary Brands

VF Corporation (VFC) has a market cap of $25.6 billion. Its stock rose by 1.4% to close at $61.49 per share on June 30, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -5.4%, -0.54%, and -0.08%, respectively, on the same day. VFC is trading 1.5% below its 20-day moving average, 1.4% below its 50-day moving average, and 3.0% below its 200-day moving average.

The PowerShares DWA Momentum Portfolio (PDP) invests 1.0% of its holdings in VF Corporation. The ETF tracks an index of 100 US-listed large- and mid-cap companies selected and weighted by relative stock performance. The YTD price movement of PDP was 2.0% on June 30.

The market caps of VF Corporation’s competitors are as follows:

• The Gap (GPS): $8.4 billion
• Ralph Lauren (RL): $7.4 billion
• Columbia Sportswear Company (COLM): $4.0 billion

VF Corporation has entered into a definitive agreement to sell its Contemporary Brands businesses, which include 7 for All Mankind, Splendid, and Ella Moss, to Delta Galil Industries for $120 million, subject to various working capital adjustments. The transaction is expected to close in the third quarter of 2016.

VF Corporation reported fiscal 1Q16 revenues of $2,839.3 million, a rise of 0.07% compared to total revenues of $2,837.3 million in fiscal 1Q15.

Its net income and EPS (earnings per share) fell to $260.3 million and $0.61, respectively, in fiscal 1Q16 compared to $288.7 million and $0.67, respectively, in fiscal 1Q15.

VFC’s cash and cash equivalents fell by 38.0%, and its inventories rose by 9.3% in fiscal 1Q16 compared to fiscal 4Q15. Its current ratio fell to 1.6x, and its debt-to-equity ratio rose to 1.0x in fiscal 1Q16, compared to 2.1x and 0.79x, respectively, in fiscal 4Q15.

The company has made the following projections for fiscal 2016:

• It expects revenue to increase at a mid-single-digit rate, which includes an ~1% negative impact from changes in foreign currency.
• The company expects its gross margin to improve by about 0.50% to 48.8%, which includes about 0.70% of headwinds from changes in foreign currency.
• It expects to see an operating margin of 14.4%, which includes a negative foreign currency impact of ~0.70%.
• It expects EPS to grow by 11% on a currency-neutral basis.
• It expects cash flow from operations to reach $1.3 billion.

In the next part of this series, we’ll discuss Ball Corporation.