VF Corp VFC

VF: Moat Rating Reduced to No-Moat From Narrow; Fair Value Cut 19%; Shares Remain Undervalued

We are downgrading our moat rating on VF to no-moat from narrow. We'd previously believed the company's three largest brands, Vans, The North Face, and Timberland, had sufficient popularity and pricing power to support a narrow moat rating based on a brand intangible asset. Although they operate in attractive categories and are well-known, each has, to varying degrees, struggled since the pandemic. We think VF has fallen behind on some consumer trends, and its product innovation has been inadequate. Specifically, Vans has posted sales declines in three of the past four years, while Timberland’s sales have dropped in four of the past five, and we think pricing power has declined for both.