VF Earnings: Turnaround Efforts Not Yet Reflected in Results; Shares Very Attractive

VF reported a loss in its fiscal 2025 first quarter, but its 9% sales decline was slightly better than our forecast for a 12% drop. The company has endured more than two years of turmoil and weak results, which prompted our recent change to a no-moat rating. Even so, we think there is real value in VF’s main brands, and that CEO Bracken Darrell’s “Reinvent” strategy shows promise. In the 12 months since Darrell joined the firm, VF has, among other moves, agreed to sell Supreme for $1.5 billion, replaced virtually all its senior leaders, and cut $300 million in costs with more to come. For fiscal 2025, VF held to its guidance of $600 million in free cash flow plus physical asset sales. Although this outlook excludes the Supreme disposition, we have already incorporated the anticipated reduction in sales and operating profit in our model. Thus, we do not expect to make any material change to our fair value estimate of $39 (reduced when we changed VF’s moat rating), leaving shares undervalued.