Wednesday, September 12, 2012

VF Corp (VFC) 2012 Review

VF Corporation, VFC,  is an apparel maker and distributor and a leader in jeans wear, sportswear, image wear and work wear. It has raised its dividend every year for the last 20 years.

Its brands include Lee, Wrangler, Jansport, Nautica, The North Face, Vans, Napaplin, Timberland, John Varvatos and Reef. The company has grown its profits and dividend at a 9-11% rate over the last 10 years earning a 15-18% return on equity.

It has raised its dividend every year for the last 20 years. Despite tough conditions in many of its product categories in 2009, management negotiated this period with barely a hiccup and set the company on a course to continue to grow earnings by:

(1) the strength of VFC’s brand management strategy provides a competitive advantage with regard to distribution as well as benefiting it tough economic periods,

(2) its long history of manufacturing and engineering expertise produces cost and service benefits,

(3) a successful acquisition program focusing on companies with global growth opportunities. The recent acquisitions of [a] Timberland will spur growth in its outdoor and sportswear businesses and [b] Rock and Republic Enterprises will increase its competitive position in premium jeans.


(1) its large international business exposes it to the vagaries of foreign laws and regulations as well as currency fluctuations,

(2) intense competition,

(3) a customer base that remains sensitive to economic conditions.

VFC is rated A by Value Line, has a 29% debt to equity ratio and its stock yields 1.9%. Its strong cash flow should allow for increasing its dividend, stock buy backs and acquisitions.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2002
VFC 1.9% 14% 28% 10
IND 1.0 8 15 NA

Debt/Equity ROE EPS Down Since 2002 Net Margin Value Line Rating
VFC 29% 20% 1 10% A
IND 36 16 NA 7 NA


Note: VFC stock made great progress off its November 2008 low, surpassing the downtrend off its June 2007 high (red line) and the November 2008 trading high (green line). Long term, the stock is in an up trend (straight blue lines). Intermediate term, it is also in an up trend (purple lines). The wiggly blue line is on balance volume. Both the Dividend Growth and High Yield Portfolios own a full position in VFC---however, that is the result of having Sold Half of this position in 2007 and the stock subsequently appreciating back to a full holding. Under our Sell Discipline, we generally only take profits once; then once our original investment is recouped, we let the stock run paying attention only to the Buy Value Range and the Stop Loss Price. The upper boundary of its Buy Value Range is $59. The lower boundary of its Sell Half Range is $147.

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.