Wind, rain, sleet, ice - in many parts of Europe, the weather is showing its uncomfortable side. Yet winter has by no means begun. According to the meteorological calendar, the coldest season does not start until December 1. But whatever the weather conditions, the right clothing is ultimately crucial. This is where the VF Corporation comes into play. The US textile company, which is rather unknown by name, is anything but unfamiliar when it comes to its brands. For example, the group's largest brand, "The North Face", has just been named the winner among the five dominant outdoor brands in the UK in an analysis by Salience Search Marketing.
Around 4 years ago, the more than 100-year-old US company completely switched its focus to outdoor. In addition to "The North Face", the portfolio includes renowned names such as "Timberland", "Napapijri", "Eastpak" and "Vans". With its outdoor and active products, VF generates annual sales of more than USD 11 billion. The Group also operates in a growth market. According to Research And Markets, the global market for winter apparel will grow from USD 306.5 billion in 2022 to USD 432.5 billion in 2030, expanding at an annual rate of 4.4%.
With a few exceptions, the revenue curve at VF is also pointing steadily upwards. However, there have recently been significant fluctuations on the profit side. High costs, weakening sales in the core US market and problems with the Vans brand meant that the Group even dipped into the red at times. Operating profit returned to positive territory in the second quarter at USD 362.9 million, following a loss of USD 90.8 million in the previous year. However, higher taxes caused the net loss to swell from USD 118.4 million to USD 450.7 million.
In order to get back on track for growth, Bracken Darrell, who took over as CEO on July 17 and was previously in charge of Logitech in Switzerland, announced far-reaching reforms. Among other things, the "Reinvent" restructuring programme aims to reduce costs and get the US market going with the help of a new organizational unit. In addition, Vans Chairman Kevin Bailey had to vacate his post. The problem child was made a top priority. CEO Darrell wants to take a "more active role in managing the brand and implementing its turnaround strategy." However, the Harvard graduate cautions against excessive euphoria. In the second half of the year, no improvement in business is expected for the iconic street and skatewear brand.
On the other hand, the pressure from more and more activist investors is growing. According to media reports, Legion Partners Asset Management acquired a stake in the clothing company at the end of October. According to the news agency Bloomberg, Legion is urging VF to sell some brands such as Timberland. However, Engaged Capital, which has been on board for some time, recently made a public presentation urging the board to cut costs, not to make any further acquisitions in the near future and to hire consultants to review non-core assets.
The appointment of former Nike executive Trevor Edwards to the board in October, a man experienced in footwear and apparel, retail and design, may be the first step. Nevertheless, investor dissatisfaction clearly characterizes the share price. This year alone, the share has lost more than a third. However, the downward trend has been ongoing since the beginning of 2021. During this period, the company's value decreased by 80%. However, the latest announcements have brought some calm to the stock market. The S&P 500 member is currently trying to form a bottom in the USD 15/18 range. The 100-day moving average also runs through this zone. If the analysts' consensus is correct, the time of major setbacks should be over. The 12-month price target of USD 17.50 is at the current level and the rating is "hold".
Perfect prospects for a barrier reverse convertible, because even a bottoming out or sideways movement leads to maximum returns for this product class. The structure even allows for setbacks without immediately reducing the earnings potential. The new soft callable BRCs on VF Corporation give the US blue chip a comfortable 45% downside leeway. However, the products are not only equipped with above-average risk buffers, the coupons are also exceptionally attractive for a single product. The CHF variant, for example, yields an interest rate of 15.00% p.a. with a maximum term of 15 months, while the USD-denominated product even offers a return of 18.00% p.a..
If the risk buffer is not sufficient and the barrier is touched, the closing price determines the return on the investment. However, if the underlying manages to return to the starting level by the end of the term, the full nominal is paid out in addition to the guaranteed coupon. Otherwise, the repayment is based on the performance of the VF share. Due to the soft callable feature, the term of the products can be shortened to a maximum of six months.
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