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Narrow-Moat VF Outperformed Our Q2 Forecast Despite Ongoing COVID-19 Impact; Shares Overvalued

David Swartz Equity Analyst

Analyst Note

| David Swartz |

Narrow-moat VF beat our sales and profit expectations in its September-ending fiscal 2021 second quarter as sales growth in global e-commerce and greater China partially offset weakness in physical stores in most regions. Although nearly all stores in North America and Europe, the Middle East, and Africa (EMEA) operated by VF and its wholesale partners are open, customer traffic is slow and COVID-19 remains a concern. VF guided to fiscal 2021 sales of at least $9 billion and adjusted EPS of at least $1.20, above our prior estimates of $8.8 billion and $1.04, respectively. We expect to increase our per share fair value estimate of $54 by a mid-single-digit percentage but view shares as overvalued. While VF is navigating the crisis as well as can be expected, we do anticipate lower year-over-year sales in this year’s holiday quarter.

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Company Profile

Business Description

VF designs, produces, and distributes branded apparel and accessories. Its largest apparel categories include action sports, outdoor, and workwear. Its portfolio of about 20 brands includes Vans, The North Face, Timberland, and Dickies. VF markets its products in the Americas, Europe, and Asia-Pacific through wholesale sales to retailers, e-commerce, and branded stores owned by the company and partners. The company has grown through multiple acquisitions and traces its roots to 1899.

8505 E. Orchard Road
Greenwood Village, CO, 80111
T +1 720 778-4000
Sector Consumer Cyclical
Industry Apparel Manufacturing
Most Recent Earnings Jun 30, 2020
Fiscal Year End Mar 28, 2021
Stock Type High Yield
Employees 48,000