V.F. (VFC)

TOP CONTRIBUTORS

Welton Blount

Thomas Shyr

V.F. Corporation (NYSE: VFC) is a leading clothing manufacturer. The company owns a broad range of major brands in denim, sportswear, and outdoor apparel. Some of its better known brands include Lee, The North Face and Vans. Even though V.F. owns some of its own retail stores, it primarily sells its clothing through department stores and other national mass-market chains; its five largest customers, including Wal-Mart, Target, and Sears. These customers consistently make up over 25% of the company's sales.

In recent years, the company has shifted its business strategy from maintaining its mass-market holdings to acquiring "lifestyle brands"—clothing that resonate with consumers and generally come with higher margins. The company has focused on using its supply chain expertise to improve these brands' business operations, while leaving the creative decisions to the brands themselves. To meet this goal, V.F. has spent over $4billion in the past several years acquiring more upscale brands like Nautica, John Varvatos, lucy Activewear, Seven For All Mankind and most recently Timberland and Smart Wool.

Company Overview

V.F. Corporation designs and manufactures apparel, motor gear products and footwear products primarily in United States and other major cities around the world. VFC strongly relies on outsourcing to independent contractors around the world. Most of its products are carried by airplanes, terrain vehicles, mini-on-road vehicles footwears, outdoor gears, skateboard-inspired and surf-inspired footwears, backpacks, luggages, handbags and other accessories markets and industries. Some of its products can also be found in specialty stores, department stores, national chain stores, and mass merchants outlets in different parts of the world. As a means of increasing market share, the company have also sort to differentiate itself from order competators by demanding exclusive contracts on store-specific items. These products are distributed by BA, PII, GR and other doorsporting goods stores.

V.F. Corporation was founded in 1899 and is based in Greensboro, North Carolina.

Business financials

In 2009, VFC earned a total $7.2 billion in total revenues. This was a decline from its 2008 total revenues of $7.6 billion. This in turn had an adverse impact on VFC's net income. Between 2008 and 2009, VFC's net income declined from a net profit of $603 million in 2008 to $458 million in 2009.^[1]

Competition

V.F. faces a broad range of competitors across its various holdings. Its Seven for All Mankind denim brand competes with labels like True Religion, Diesel, and Citizens for Humanity. It's Nautica brand competes against Polo Ralph Lauren, Van Heusen, and IZOD. The company's North Face brand competes with other outdoorswear brands like Timberland and Columbia Sportswear.

Notes

1. ↑ [http://www.wikinvest.com/stock/V.F._%28VFC%29/

   Contents 1 Breakdown of Holdings 2 Trends and Forces 2.1 Volatility of Fashion Trends 2.2 U.S. Economic Conditions 2.3 Dependency on Department Stores

   Breakdown of Holdings

   Historically, V.F.'s revenue has largely come from its holdings in mass market jeanswear (e.g. Lee, Wrangler, and Rustler jeanswear), as well as intimate apparel. But as the company seeks out brands with higher growth prospects, it sold its intimate apparel unit and acquired several luxury demin and sportswear lines. In addition to these higher-end brands, a significant portion of the revenue is derived from the company's outdoor apparel holdings, which includes brands such as Reef, Vans, and the North Face.

   Trends and Forces

   Volatility of Fashion Trends

   The world of luxury consumption is quite often a fickle one. Less well-established brands that were popular one season can lose much of their luster in the next one. As V.F. seeks to expand its presence in the higher end of the apparel market, it must contend with the potential for rapid change in consumer tastes. These fluctuations may lead to increased volatility in V.F.'s revenues in the years to come. However, if VFC is able to build a consistent and strong brand, it can attempt to overcome the volatility of the fashion trends.

   U.S. Economic Conditions

   Roughly three quarters of V.F.'s business is conducted within the United States, rendering it particularly susceptible to shifts in the U.S. economy. Recent trouble in the credit markets, coupled with high gasoline prices, have the potential to depress domestic consumer spending, thereby impacting V.F.'s bottom line. However, V.F.'s mass market jeanswear, which accounts for almost half of the company's, serves as a significant hedge against decreases in consumer discretionary spending. Although V.F.'s brands attract a wide range of customers, most consumers are more likely to spend on low-cost wardrobe basics than designer apparel in an economic downturn. But as V.F. continues to expand its near luxury holdings, it will become more vulnerable to changes in the U.S. economy.

   Dependency on Department Stores

   Department stores in the United States have undergone significant changes in recent years. In response to declining margins, stores have implemented tighter inventory controls and have scaled back the quantities of merchandise that they purchase from wholesalers like V.F. As a means of increasing market share, companies have also sought to differentiate themselves from the competition by demanding exclusive contracts and store-specific private labels (e.g. Ralph Lauren's "American Living" line for J.C. Penney).<ref>[http://www.usatoday.com/life/lifestyle/fashion/2007-09-25-fashion-downmarket_N.htm "Top fashion designers go down-market"], USA Today (published September 25, 2007) </li></ol></ref>