NEW YORK (AP) -- Moody's Investors Service lowered its rating outlook Monday on V.F. Corp. to "negative" from "stable," saying the clothing company appears to be taking a more aggressive financial policy.
V.F. repurchased roughly $300 million of its shares in the first quarter and was going to pay for it with its free cash flow over the course of the year, according to Moody's. That follows a $2.2 billion acquisition of The Timberland Co., which closed in September.
Moody's said the two moves so close together indicate a change in strategy. Instead of repaying the debt from the Timberland deal, V.F. has opted to use its cash for share repurchases and take on a more leveraged position than in the past, according to the rating agency.
Moody's also noted that the company's finances are under added pressure by a recent increase in its unfunded pension deficit, which it says grew by roughly $195 million last year.
While lowering the outlook, Moody's affirmed the company's senior unsecured rating of A3 and commercial paper rating of Prime-2.
The rating agency said that the company's performance continues to be solid, but with the large buybacks, there is less cushion for it to improve its balance sheet.
V.F., based in Greensboro, N.C., is one of the world's largest clothing makers with brands include The North Face, Timberland, Wrangler, Lee and Vans.
Its shares fell $2.15 to close at $152.05.
