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From Timberland to The North Face

V.F. Corporation (VFC) is a global leader in the design, production, procurement, marketing and distribution of branded lifestyle apparel, footwear and accessories, notes Camilla Yanushevsky, and analyst with CFRA Research's The Outlook.

The firm's portfolio consists of more than 30 brands spanning from denim, outerwear, footwear and sportswear, to workwear and luggage.

Its most notable brands include: The North Face (outdoor performance apparel, footwear and equipment); Vans (skateboard-inspired footwear and apparel); and Timberland (outdoor adventure-oriented apparel and footwear).

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Our positive investment view reflects attractive fundamentals and strong positioning as a performance-driven and value-creating lifestyle sports company post-Kontoor separation, completed in May.

With adjusted leverage below targeted levels (debt-to-EBITDA below 2x), VF has significant capacity to pursue its M&A agenda, while delivering superior returns to shareholders. (VF hiked its dividend 12% to $0.48/share and $3.8B remains under current share repurchase authorization).

The successful launch of FutureLight on October 1 has generated strong brand heat and supports our bullish outlook into the holiday season and FY 21 (March).

Our 12-month target is $105, 30.5x our FY 20 estimate of $3.44, above the three-year historical forward P/E average, reflecting momentum in Vans and The North Face, which we expect to drive 80% of growth over next five years.

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Risks to our view include unexpected bankruptcies, which weighed in September quarter of FY 2019. Despite macro challenges like forex, tariffs and disruptions in Hong Kong impacting FY 20 EPS by $0.07, or 2%, we remain confident in the stock's resiliency.

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