Bulls supportive points:
– As one of the largest apparel companies in the world, V.F. Corporation (NYSE:VFC) benefits from substantial economies of scale in manufacturing, sourcing, and distribution.
– VF’s apparel business is highly diversified across brands, product categories, channels of distribution, and geographies.
– VF’s lifestyle brands continue to gain share by adding new product categories while widening its overall distribution, driving improved profitability.
– Management has set long-term operating and financial targets that reflect the firm’s mass-channel consumer appeal and leading apparel market share.
– The Timberland acquisition opens new avenues for growth, particularly internationally, and the brand is a complement to the billion-dollar North Face franchise.
Points to take into consideration:
– Risks to the growth-via-acquisition strategy are numerous. They include overpaying for acquisitions, or failing to integrate brands into the portfolio suite, which could divert management’s attention from core operations.
– The trend toward private-label merchandise ultimately could squeeze floor space for VF Corp.’s branded apparel and accessories.
– Virtually all of VF’s merchandise is sourced from outside the U.S. Any disruption in the company’s supply chain could have a negative impact on margins.
– In 2011, sales to VF’s 10 largest customers accounted for 23% of the company’s revenue. Wal-Mart represents 9% of total sales, substantially all of which were in jeanswear.
– The firm’s attempt to move to higher price points may not be well received, particularly in Europe, where austerity measures and entrenched competition are headwinds.
Bottom line
V.F. Corporation (NYSE:VFC)’s brand success, in my opinion, is supported through its operational structure, which allows individual brands to function independently and pursue separate growth initiatives while leveraging centralized procurement, information technology, and logistics. The firm operates more than 30 manufacturing sites and 30 distribution centers, and each year ships more than 400 million units, across 30 brands, to its customers. This production model is far different from many of VF’s competitors, and is an aspect that we view as a competitive advantage.
Ahsan Aslam Khan has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Ahsan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article VF’s New 5-Year Plan Indicates Ambitious Expansion Plans originally appeared on Fool.com and is written by Ahsan Aslam Khan.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
