A Closer Look at This Clothing Retailer's Lackluster Financials

[View in browser]( [The Spill Logo] Proprietary Data Insights Financial Pros’ Top Apparel Stock Searches in the Last Month Rank Name Searches #1 'V.F. Corp 31 #2 'Abercrombie & Fitch Company 14 #3 'Lululemon Athletica 13 #4 'Canada Goose Holdings Inc 10 #5 'Carter's Inc 9 #ad [The Most Researched Stocks [FREE REPORT]]( Brought to you by [Coin and Card]( [New AI Tech Unlocks Massive Profit Potential]( [Coin and Card - New AI Tech Unlocks Massive Profit Potential]( One company is about to radically transform the collectible market into an expansive digital marketplace. [Invest Now]( This Clothing Retailer isn’t Wowing Financial Pros Life hasn’t been easy for apparel stocks. YTD, the Retail ETF (XRT) is up 2%, while the broader market gained 14%. V.F. Corp. (VFC), the top search by financial pros in the industry, epitomizes the challenges faced by the sector. Revenues are up just 4% since 2015, while profit margins plunged from 11.2% to just 1.0%. Although the almost 6% dividend is fairly safe, we don’t like the growth prospects for this top financial pro search. V.F. Corp’s Business Remember when North Face jackets were all the rage? You can thank VFC, or VF Corporation, a global leader in lifestyle apparel and accessories that's been around since 1899., operating in over 50 countries with over 50,000 employees. The company holds a rich portfolio of over 30 renowned brands like The North Face, Timberland, and Vans, targeting outdoor-based lifestyles to performance-driven activewear. VFC distributes its products through a network of specialty stores, department stores, e-commerce sites, and other digital platforms. Its business segments into the following areas: - Outdoor (39.7% of revenues) - Includes renowned outdoor-based lifestyle brands such as The North Face, Timberland, and Napapijri. - Active (51.1% of revenues) - Features performance-based and youth culture-inspired brands like Vans, Supreme, and Eastpak. - Work 9.2% of revenues) - Comprises work and work-inspired lifestyle brands like Dickies and Timberland PRO. Other breakdowns include brand, region, and channel. [Summary] [Source: VFC Q1 ‘24 Earnings Release]( While Vans and the Americas are the top sellers, both saw dramatic sales declines YoY as consumer apparel spending pulled back. However, Asia Pacific provides the company with consistent growth. Financials [Financials] Source: Stock Analysis Although revenue stagnated and gross margins improved, operating margins compressed as SG&A costs rose as a percentage of revenue. Our research suggests diversification of its product lines, digital transformation, and acquisitions & divestitures contributed to this problem. However, despite a lower sales forecast for the year, management maintained its EPS and free-cash-flow targets as it optimizes supply chains and reigns in costs. Management currently pays an almost 6% dividend yield while carrying $7.9 billion in debt with a 2.5% interest rate. While the trailing 12-month operating cash flow is negative, VF has delivered positive free cash flow for the last three quarters. If VF can hit its free-cash-flow targets for the year, it will cover its dividend payouts by roughly $500 million. Valuation [Valuation] Source: Stock Analysis Apparel companies are largely valued on their growth. VFC trades at just 10x forward earnings and ~8.3x forward free-cash-flow. That’s cheaper than Lululemon Athletica (LULU) and Canada Goose Holdings (GOOS), though in line with Carters (CRI) and a bit cheaper than Abercrombie & Fitch (ANF). Growth [Growth] Source: Seeking Alpha Looking at the growth over the last year and 5-year period, it’s easy to see why each stock is valued where it is. VFC, ANF, and CRI struggled with sales growth, while LULU and GOOS saw double-digit gains. And for the latter two companies, that also translated to free-cash-flow growth. Profitability [Profit] Source: Seeking Alpha All the gross margins are roughly in line. However, LULU runs a whopping 22% EBIT margin, while VFC and ANF are below 10%. Plus, LULU is the only one with a net income margin of over 10%. VFC and ANF barely hold 1%. [The surprising asset that (handily) beat 94% of the S&P 500]( * In just 604 days, a $10,000 investment in this opportunity would have secured an eye-popping $4,900 profit. That's a 27.3% net annualized return – beating 470 of S&P 500 stocks over the same time period. So what was it? A fractionalized painting from Masterworks, the blue-chip art investing platform. (They do say investing is an art, not a science…) While not every painting will see those gains, every one of Masterworks’ 14 exits has returned a profit to investors, totaling more than $45 million in sales. New offerings can sell out fast, but you can skip the waitlist with this exclusive link. [Skip the waitlist]( * * See important Reg A disclosures at masterworks.com/cd. Our Opinion 2/10 We simply don’t see any reason to own VFC. While the brands are well known, the company needs to find a pathway to higher profitability and growth, something we haven’t seen yet. We’d prefer to see management deliver more savings on the SG&A line before considering a long position. [-facebook-share]( [-twitter-share]( [-linkedin-share]( [-email-share](mailto:?body= %3Cbr+%2F%3E%0A%3Cb%3EFatal+error%3C%2Fb%3E%3A++Uncaught+Error%3A+Cannot+use+object+of+type+stdClass+as+array+in+%2Fvar%2Fwww%2Fhtml%2Fnl_forms%2Fsrc%2FICTheSpill%2Fautomate-ic-article.php%3A45%0AStack+trace%3A%0A%230+%2Fvar%2Fwww%2Fhtml%2Fnl_forms%2Fsrc%2FICTheSpill%2Fautomate-ic-article.php%28142%29%3A+get_duplicate_article_id%28%29%0A%231+%7Bmain%7D%0A++thrown+in+%3Cb%3E%2Fvar%2Fwww%2Fhtml%2Fnl_forms%2Fsrc%2FICTheSpill%2Fautomate-ic-article.php%3C%2Fb%3E+on+line+%3Cb%3E45%3C%2Fb%3E%3Cbr+%2F%3E?utm_medium=ic-nl&utm_source=112104 ) News & Insights Just Spilled - [Financial Pros Top Stock Search]( - [All eyes are on Real Estate & Private Equity as investors hedge against inflation]( - [The Surprising Bank Financial Pros Picked]( - [TWLO – Fin Pros Might Be On To Something]( [News & Insights-facebook-share]( [News & Insights-twitter-share]( [News & Insights-linkedin-share]( [News & Insights-email-share](mailto:?body= %3Cbr+%2F%3E%0A%3Cb%3EFatal+error%3C%2Fb%3E%3A++Uncaught+Error%3A+Cannot+use+object+of+type+stdClass+as+array+in+%2Fvar%2Fwww%2Fhtml%2Fnl_forms%2Fsrc%2FICTheSpill%2Fautomate-ic-article.php%3A45%0AStack+trace%3A%0A%230+%2Fvar%2Fwww%2Fhtml%2Fnl_forms%2Fsrc%2FICTheSpill%2Fautomate-ic-article.php%28142%29%3A+get_duplicate_article_id%28%29%0A%231+%7Bmain%7D%0A++thrown+in+%3Cb%3E%2Fvar%2Fwww%2Fhtml%2Fnl_forms%2Fsrc%2FICTheSpill%2Fautomate-ic-article.php%3C%2Fb%3E+on+line+%3Cb%3E45%3C%2Fb%3E%3Cbr+%2F%3E?utm_medium=ic-nl&utm_source=112104 ) [We want to hear from you. Let us know your thoughts by clicking here]( [Ads] [InvestingChannel Logo](#) Follow us on: [Facebook Logo]( [LinkedIn Logo]( [Twitter Logo]( [Instagram Logo]( To ensure delivery of all emails, [allow us on your list](. Manage your subscriptions with our [preference center](. [Unsubscribe here.]( View our privacy policy [here](. Copyright ©2023 InvestingChannel. All rights reserved. 1325 Avenue of the Americas, Floor 27 & 28 New York, New York 10019 Disclaimer: This is not investment advice. This InvestingChannel, Inc., newsletter is for information purposes only and is based on opinion. Futures, forex, stock, and options trading are not appropriate for all investors. There is a substantial risk of loss associated with trading these markets. Losses can and will occur. No system or methodology has ever been developed that can ensure returns or eliminate losses. InvestingChannel, Inc., makes no representation or implication that using any of the methodologies or systems in this newsletter will generate returns or insure against losses. Investors should be cautious about any and all investments and are advised to conduct their own due diligence prior to making any investment decisions. [Link](