EUR 850.00 For Business Accounts Only

Morningstar | VF's Active and Outdoor Offering Seeing Strong Demand, Supporting Brand Advantage

VF has established a broad and growing array of leading lifestyle brands selected to enhance its presence in high-growth categories and for synergies within existing operating units. The brand portfolio is currently anchored in outdoor and active sports, a dominance we expect to continue, with the two coalitions accounting for about 70% of total revenue.We believe apparel manufacturers are uniquely positioned to strengthen brand intangible asset moats by developing direct relationships with consumers and retaining absolute control over product and experiences in this e-commerce environment. In calendar 2017, VF’s direct-to-consumer channel accounted for 32% of revenue (up from 28% in the prior-year period). Within this, we expect store growth to slow and the focus to shift to digital, which management sees growing from 5% of revenue (March 2017) to 12% in fiscal 2022 (or from mid- to high teens penetration versus stores in the direct-to-consumer channel to north of 30% in 2021). Although we expect the U.S. wholesale environment to remain weak, we think VF’s exposure is minimized. More than 70% of the wholesale business is international, specialty, and pure-play digital retailers while 15% of the business is mass merchant.The international channel will be another high-growth channel with the potential to continue growing at a high-single-digit constant-currency compound annual rate over the next five years. We see this growth as being particularly driven by China, with 300 million new consumers entering the middle class. Asia-Pacific accounted for only 11% of total revenue in calendar 2017, up from 10% in the previous year.VF is a wide-moat company that continues to gain market share. We think shareholder value could be enhanced through share buybacks, additional acquisitions (Williamson-Dickie closed in the fourth quarter), and outsize growth of the direct-to-consumer channel.