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Weakness in Wholesale Continues to Pressure VF’s Lee and Wrangler

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Evaluating the performance of VF’s segments

In this part of the series, we’ll take a look at the performance of VF Corporation’s (VFC) Jeanswear and Imagewear segments during the second quarter of 2017.

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Wrangler and Lee’s sales fell due to weakness in wholesale channel

VF’s Jeanswear segment, which includes the famous Lee and Wrangler brands, recorded a 4.5% YoY (year-over-year) fall in 2Q17 sales.

As expected, Wrangler brand’s global revenue fell 2.0%. The fall was anchored by a low single-digit decline in the wholesale business, which completely offset the low double-digit rate growth in the DTC (direct-to-consumer) business.

Looking at geographies, sales fell 2.0% in America and rose 5.0% in Europe. Asia, which represents only 3.0% of the global Wrangler business, recorded a double-digit fall during the quarter. Wrangler sales in America continue to be negatively impacted by channel consolidation and inventory destocking.

Moving on to the Lee brand, sales fell 6.0% YoY during the quarter as the low double-digit fall in wholesale washed away the gains from a solid 25.0% growth through the DTC channel.

Lee America sales fell 9.0% due to the ongoing channel headwinds and consolidations. The Lee Europe business fell 4.0% since a low single-digit rise in D2C sales was offset by a mid-single-digit fall in the wholesale business.

Imagewear business returns to growth

Turning to Imagewear, revenue rose 12.0% during the quarter, mainly due to LSG (Licensed Sports Group) jersey sales. The company sold its licensing business in early April 2017. As part of the transaction, VF agreed to supply jerseys to the acquirer for the next year. Apart from LSG jersey sales, the Imagewear business rose 2.0% during the quarter.

Investors who want exposure to VFC could consider the VanEck Vectors Morningstar Wide Moat ETF (MOAT), which invests 2.6% of its portfolio in VFC.

In the next part of this series, we’ll look at VF’s bottom line performance in 2Q17.

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