DA Davidson Downgrades VF Corp To Neutral, Says Long-Term Growth Drivers 'Need Time To Shine'

D.A. Davidson’s Andrew Burns believes that the long term drivers of value creation for VF Corp VFC remain intact, retail and category headwinds are likely to limit the company’s near term growth potential.

Burns downgraded the rating on the company from Buy to Neutral, while lowering the price target from $78 to $64.

Headwinds

“Absent an acquisition, upside will be difficult to come by as VFC's five key growth drivers each face unique headwinds (TNF, Timberland, Vans, DTC, International),” the analyst mentioned.

Burns noted that Timberland has been undergoing a retail inventory correction that is likely to restrict near term growth, while Vans has been seeing a shift in footwear trends towards fashion athletic products.

“While already factored into guidance, The North Face is up against a promotional outerwear environment as retailer carryover inventory is cleared,” Burns stated, while adding that any upside to H2 would need favorable weather.

International Growth Also Muted

In addition, the analyst pointed out that International growth potential was also muted in the current economic environment, while the performance of DTC was likely to be impacted by the overall retail traffic “woes.”

“VFC's enviable diversification by brand, region, and distribution channel certainly helps mitigate downside scenarios, but the overall picture limits upside in our view,” Burns explained.

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