VF Corp Shares Climb After Barclays Upgrade
VF Corp shares climb in pre-market trading on Wednesday. This came after Barclays upgraded its rating from “equal weight” to “overweight.” The upgrade signals confidence in the company’s future under CEO Bracken Darrell.
Barclays Sees Attractive Risk-Reward Potential
Barclays highlighted the attractive risk-reward balance of VF Corp at current levels. Several catalysts could fuel a significant turnaround. Progress is expected in the next four to six quarters, beginning modestly in fall 2024 and gaining momentum into 2025.
Strategic Shifts Led by CEO Bracken Darrell
Barclays is confident in the strategic changes led by CEO Bracken Darrell. His focus on product development and leadership improvements is crucial. These shifts are seen as the foundation for the company’s broader recovery.
Although early in the process, Barclays believes VF Corp may soon experience a turning point. Stocks often recover once meaningful changes take hold.
Gross Margin Stabilization: Key to Recovery
A major factor in VF Corp’s recovery is its effort to stabilize gross margins. Barclays noted the improvement in gross margins, despite challenges from optimizing its product and brand portfolio.
“While near-term uncertainty remains, we see encouraging sequential sales improvements at Vans and a gross margin beat for FY1Q25,” Barclays analysts stated. This improvement could set the stage for stronger earnings as VF Corp streamlines its operations.
Supreme Sale to Help Reduce Debt
Barclays also pointed out the financial benefits of the upcoming $1.5 billion sale of Supreme. This deal, expected to close by the end of 2024, will help VF Corp reduce its debt. This move will improve the company’s leverage ratio and give it greater operational flexibility.
Upcoming debt maturities in December 2024 and April 2025, along with ongoing debt reduction efforts, are key milestones in VF Corp’s financial repositioning.
Vans Brand Revitalization Crucial for Growth
A key part of VF Corp’s recovery depends on the revitalization of the Vans brand, which has struggled in recent years. Barclays remains cautiously optimistic. They noted early signs of renewed brand engagement through new marketing efforts and product launches.
Although it’s too early to declare a full recovery, Barclays believes 2025 could be a turning point for Vans. This would be a critical step in VF Corp’s overall recovery strategy.
Sales Growth Expected by 2025
Barclays predicts VF Corp could return to positive sales growth by mid-to-late 2025. Improved brand performance and operational efficiency will drive this growth. This would mark a significant shift for VF Corp after a period of declining sales.
Key Insights Expected at Investor Day
Investors are looking ahead to VF Corp’s Investor Day on October 30, 2024. Barclays considers this a crucial moment for management to provide updated guidance. CEO Bracken Darrell is expected to share new performance metrics, which could boost investor confidence in the company’s recovery plan.
Remaining Challenges: Vans and Competition
Despite the optimism, challenges remain. The biggest hurdle is the successful revitalization of Vans, which has been a weak point. Additionally, The North Face brand may face competition and climate-related risks, especially since it depends heavily on the winter sports season.
Market Response: A Positive Sign
VF Corp shares rose 4.3% in pre-market trading on Wednesday, signaling growing investor confidence in the company’s turnaround efforts.