VF Earnings: A Tumultuous Fiscal 2023 Ends With Some Signs of Optimism; Shares Very Undervalued

VF VFC closed the books on its troubled (March-end) fiscal 2023 with results that largely met our modest expectations. While the firm appears to be making progress on its key turnaround plans, including better supply chain and inventory management, and increasing sales of Vans, the benefits of these efforts may not be apparent until fiscal 2025, especially as it still lacks a permanent CEO. Indeed, initial guidance for fiscal 2024 EPS of $2.05-$2.25 is below our $2.41 estimate. Even so, we continue to believe our medium-term estimates, including annual sales growth of about 6% and operating margins in the low teens, are reasonable, and do not expect to make any material change to our $60 per share fair value estimate. While our valuation may look aggressive with VF’s shares down more than 50% over the past year, we believe its recent problems are fixable, and that the strength of its key brands, the source of our narrow-moat rating on the firm, holds.