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VF Corporation “Van”-dicated in First-Quarter Earnings

Caroline Banton, The Motley Fool

The retail sector is strong, buoyed by a healthy economy. Consumers, particularly young consumers with plenty of disposable income, continue to sink more money into their favorite brands such as VF Corporation (NYSE: VFC)-owned Vans and North Face. But will these big brand names continue to dominate, or are they about to fall victim to the next fashion movement of the 2020s?

Uncontrollable variables aside, such as trade deals and investor confidence, a lot depends on company leadership. For VF, the signs all point to a company with stellar navigators at the helm.

A man and woman carrying shopping bags

VF has a finger firmly on the market's pulse

VF has succeeded, not just by the revival of Vans although that has boosted earnings enormously, but by dominating its supply chain, focusing on its core capabilities, and wisely divesting of other, less lucrative product areas such as its jeanswear.

The Vans brand has soared with $1.4 billion in growth in the last two years, and it is a testament to VF's ability to read and respond to the market. Even while Vans were making a solid comeback, VF was ahead of the curve introducing oversized "platform" editions of the Old Skools, Authentics, and Slip-On designs in response to market trends.

According to culture writer Alex French who was interviewed by GQ, "Sneaker culture really at its heart is about taking a common object, and flipping it and trying to find a way to make it your own." And that seems to be VF's approach to everything business.

Timely spin-offs

Knowing the market means that astute leadership can ditch less lucrative brands and product lines to focus on core strengths. In April 2019, VF announced that it would be separating its jeanswear organization into an independent, publicly traded company to be named Kontoor Brands, Inc. This new entity would include the Wrangler, Lee, Rock & Republic brands, and the VF Outlet business.

For now, these brands are simmering on the back burner, at least until an evocative and venerated denim-clad social influencer decides to walk to their gate at LA airport smoking a cigarette with the distinctive loopy Wrangler logo on their jeans. Not a winning look so far for 2019, but, for 2020? Who knows?

Climate and social responsibility

It's easier to meander city streets in a pair of Vans or Timberlands when you are confident the brand is prioritizing climate and social responsibility. Millennials, Gen X-ers, and Gen Z-ers are more environmentally aware than baby boomers, and what better way to make a difference than by both looking cool and looking cool in a responsible brand?

In May, VF signed the Fashion Industry Charter for Climate Action and committed to pursuing net-zero emissions by 2050. VF publishes its supply chain source maps to show that its products meet certain sustainability standards.

And with credibility in its social responsibility efforts, the company is parlaying its sustainability commitments into its marketing campaigns. For example, the company was the primary sponsor of the Vans Triple Crown of Surfing and is making it the world's most sustainable surf event powered by 70% renewable energy.

A sustainable and lucrative financial outlook

The responsive and nimble leadership of VF continues to pay off financially. First-quarter earnings for 2020 were rosy, and the company raised the outlook for full-year 2020 implying no expectations of an imminent fall in demand for its products. Full-year fiscal 2020 adjusted revenue from continuing operations were revised to approximate $11.8 billion, reflecting growth of approximately 6%.

Full-year fiscal 2020 adjusted earnings per share from continuing operations were also increased and are expected to be in the range of $3.32 to $3.37 including an additional $20 million, or $0.04 per share, of incremental investment. This will reflect growth of 16% to 18%.

Earnings per share for first-quarter earnings were $0.24, and adjusted earnings per share increased 61% to $0.30.

All in all, VF Corps stands out as a younger, fresher, more dynamic company that is constantly monitoring the pulse of its target market. Add to that the ability of machine learning combined with consumer data to predict whether Birkenstocks will be the next Vans, VF Corps will continue to stride out taller than the competition in its oversize platform Old Skools.


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Caroline Banton has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com