Management expects strong performance from its outdoor business
VF Corporation (VFC) posted strong results in its Outdoor segment during the first quarter of 2017. The segment, which includes revenues from Vans, the North Face, and Timberland brands and accounts for ~65% of the company’s top line, recorded a 2.1% YoY jump in sales.
VFC’s management aims to increase focus on the segment’s brands going forward. The North Face, which rose 8% in 1Q, is likely to grow at a mid-single-digit rate in fiscal 2017. Vans is expected to post low-digit growth, while Timberland is predicted to increase in the low-single-digit range.
Ongoing channel headwinds to hit North America
VFC’s international business is expected to continue with its strong momentum. Europe and Asia are forecasted to grow at mid-single-digit rates in fiscal 2017.
The North America business is, however, predicted to contract at a low single digit rate, primarily as a result of the inventory destocking in the Jeanswear segment. This impact will be higher in the second quarter as compared to the back half of the year.
Jeanswear to remain flat in fiscal 2017
The Wrangler business was down 9% in the first quarter, which negatively affected the company’s inventory destocking actions and channel consolidation in North America. VFC’s management expects these measures to affect the Wrangler business in the second quarter as well. The business should, however, return to growth by the end of the year.
Lee is also expected to face ongoing channel headwinds and challenging conditions in the women’s business in the remainder of the year. As a result, the overall Jeanswear segment is expected to remain flat in fiscal 2017.
Investors looking for exposure to VFC could consider the Morningstar Wide Moat ETF (MOAT), which invests 2.6% of its portfolio in VFC.