VF Corporation: Built on Brands

VF Corporation is the company behind brands like The North Face, Timberland, and Vans. With strong brand equity and a growing direct-to-consumer presence, it has long held a leading position in lifestyle and performance wear. Now, after a period of setbacks, VF is undergoing a major transformation to revive growth and improve profitability. The question is: Can this turnaround story earn a place in your long-term portfolio?

This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me. 

For full disclosure, I should mention that I do not own any shares in VF Corporation at the time of writing this analysis. If you would like to copy or view my portfolio, you can find instructions on how to do so here. If you want to purchase shares or fractional shares of VF Corporation, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.

The Business

VF Corporation is one of the world’s largest apparel, footwear, and accessories companies, owning a broad portfolio of lifestyle brands across three segments: Outdoor, Active, and Workwear. Its most prominent brands include The North Face, Vans, Timberland, and Dickies. Founded in 1899, VF operates globally across the Americas, Europe, and Asia-Pacific. The company distributes products through both wholesale channels such as specialty and department stores and a growing direct-to-consumer network that includes VF-operated retail stores, e-commerce platforms, and digital partners. In fiscal 2025, direct-to-consumer made up 44 percent of revenue, with e-commerce alone contributing 18 percent. VF designs, markets, and sources roughly 260 million units annually through around 273 independent manufacturers across 30 countries. It has developed regional sourcing hubs in Singapore, Panama, and Switzerland to reduce lead times and improve flexibility. The company also operates 16 distribution centers globally and has made efforts to localize production to better serve regional demand. VF’s competitive position is anchored in several advantages that together form a durable moat, including strong brand equity, global scale, a flexible supply chain, an expanding direct-to-consumer business, and high standards in responsible sourcing. Its brands are widely recognized and enjoy deep consumer loyalty. The portfolio spans product categories and price points, appealing to both performance-oriented and lifestyle consumers. The company benefits from scale, not just in sourcing and logistics, but also in marketing and distribution. Its direct-to-consumer business allows it to control customer experience, improve margins, and respond quickly to consumer demand. VF also maintains a strict supplier compliance program focused on ethical labor and environmental standards, reinforcing trust in its brands and mitigating reputational risk.

Management

Bracken Darrell serves as the CEO of VF Corporation, a position he assumed in July 2023. He brings more than three decades of leadership experience across a range of global consumer-facing companies, including PepsiCo, General Electric, Procter & Gamble, Whirlpool, and most notably, Logitech. He holds a B.A. in English from Hendrix College and an M.B.A. from Harvard Business School. Before joining VF Corporation, Bracken Darrell was best known for his successful eleven-year tenure as President and CEO of Logitech, where he led a dramatic turnaround that transformed the company into a design-led, innovation-driven organization. Under his leadership, Logitech’s market value increased more than tenfold, gross margins expanded by nearly 1,000 basis points, and the company was widely recognized for its product design, sustainability practices, and strong financial performance. Prior to Logitech, he played a key role in revitalizing Old Spice at Procter & Gamble, where he helped more than triple the brand’s market share and reposition it as a category leader through bold marketing and innovation. Bracken Darrell is widely regarded as a transformative leader who combines a strong design sensibility with a deep commitment to people and culture. He has been named Swiss CEO of the Year three times and consistently ranked in the top 5% of CEOs on Comparably, based on employee reviews. Known as a “people’s CEO,” he frequently engages with employees at all levels and believes strongly in introspective leadership. After five years at Logitech, he famously conducted a self-assessment by imagining he had been fired, asking himself whether he would rehire himself and what would need to change if not. While he is still early in his tenure at VF, Bracken Darrell’s track record in turning around underperforming businesses, coupled with his people-first leadership style and sharp focus on innovation and brand strength, give confidence that he is well-positioned to lead VF Corporation through its next chapter.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. VF Corporation has historically achieved an acceptable ROIC, but it has been underwhelming in four out of the last five years. ROIC has been significantly lower in four of the past five years due to a combination of temporary disruptions and structural challenges. In FY 2021, the COVID-19 pandemic led to widespread store closures, supply chain delays, and a sharp drop in consumer demand, which hurt earnings and increased inventory levels across the apparel sector. More recently, from FY 2023 through FY 2025, VF has faced pressure on several fronts. Vans, historically one of its most profitable brands, has seen declining sales and relevance, which has weighed heavily on overall profitability given the brand’s large contribution to capital employed. At the same time, higher costs for materials, labor, and freight, along with currency headwinds and discounting to clear excess inventory, have compressed gross margins. While the company has begun to cut costs, these efforts haven’t yet fully offset the lower margins. On top of this, VF’s return on capital has been held back by the size of its asset base. The company still carries a lot of value on its balance sheet from past acquisitions, even though profits have declined in recent years. At the same time, VF is in the middle of a multi-year turnaround effort, which requires spending on restructuring, upgrading its supply chain, improving digital operations, and bringing in new leadership. These investments are important for the company’s long-term recovery, but in the short term, they add costs without yet boosting earnings, making returns on capital look weaker for now. Low ROIC over several years is a warning sign, especially for a consumer goods company that historically earned double-digit returns. However, if the current drag is due to temporary issues (e.g. supply chain normalization, brand turnaround, short-term restructuring), then it could recover. Bracken Darrell’s focus on improving gross margins, reducing costs, and streamlining the business is a step in the right direction. His success at Logitech shows he understands how to run a more efficient and profitable company. If VF can revive Vans, keep The North Face growing, and better manage its inventory and cash flow, returns on capital should start to improve by fiscal 2026 to 2028. However, if key brands continue to struggle or the turnaround plan falls short, low ROIC could become a more permanent issue.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. VF Corporation’s equity has declined significantly over the past decade due to a mix of falling profitability, asset write-downs, and increased reliance on debt. In recent years, the company has posted several net losses, which directly reduce retained earnings and therefore shrink the equity. This drop in profitability has been driven by challenges across some of its key brands, rising costs, and pressure on margins. At the same time, VF has written down the value of certain assets, especially goodwill from past acquisitions that didn’t perform as expected. These impairments reduce the accounting value of assets and weigh further on equity. The company has also taken on more debt to fund acquisitions and operations, without a corresponding increase in earnings. That combination, lower profits, asset impairments, and higher leverage, has contributed to the decline in equity. Whether this trend is a concern depends on VF’s ability to improve margins, strengthen brand performance, and return to consistent earnings. If the turnaround plan is executed well, equity can begin to recover over time.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins provide a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. VF Corporation has had years of negative or declining free cash flow due to a mix of investment activity, operational challenges, and short-term timing effects. In earlier years like FY 2018, the company spent heavily on acquisitions and projects aimed at upgrading its supply chain and expanding its direct-to-consumer business. These investments increased spending at a time when cash coming in from operations was not enough to offset it. In FY 2023, free cash flow turned negative again, mainly because the company was dealing with weaker profits, high inventory levels, and early costs tied to its turnaround efforts. The business was under pressure, particularly at Vans, and cash generation slowed while the company continued to spend on restructuring and ongoing operations. In FY 2025, free cash flow declined for different reasons. Management explained that the shortfall was largely due to a timing decision: a payment originally due in early April was made at the end of March to avoid potential charges. This pulled some cash out of the reported fiscal year, though management noted that the underlying cash flow from operations remained in line with expectations. Looking ahead, they expect both operating and free cash flow to improve. While past declines reflect a mix of strategic spending and temporary pressures, future performance will depend on how successfully VF can rebuild margins and restore profitability. The decline in free cash flow has already led to two dividend cuts in recent years, just after the company had reached the level of dividend king. Management has acknowledged that while another cut is not currently planned, it remains an option if needed. Even with low free cash flow in FY 2025, the company is trading at a much higher free cash flow yield than usual, which suggests the shares may offer attractive value at current levels. However, we will revisit valuation later in the analysis.

Debt

Another important aspect to investigate is the level of debt, and we aim to determine whether a business has manageable debt that can be repaid within three years. This is assessed by dividing total long-term debt by earnings. For VF Corporation, this shows that the company currently has 48,7 years of earnings in debt, which is far above the three-year threshold. Even when using adjusted earnings, which remove one-time and unusual items, the result is still 11,8 years, better, but still higher than I would like. Adjusted EPS excludes items such as impairment charges from struggling brands like Vans, restructuring costs from the company’s turnaround efforts, and certain tax-related adjustments. The idea is to focus on how the core business performed without the impact of special items that are not expected to repeat. While the debt level is clearly elevated, management has made progress in bringing it down. They reduced the overall debt meaningfully compared to the previous year and lowered their leverage ratio, which measures debt in relation to profits. They’ve also set a clear goal to reduce this further and believe they are on track to get there. Management expects both earnings and free cash flow to improve in the coming year, which would make it easier to continue paying down debt. So while the current debt level is higher than I’d like to see, the direction is positive, and the company seems focused on strengthening its financial position.

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Risks

Macroeconomic conditions are a risk for VF Corporation because its business depends heavily on consumer spending, particularly for discretionary items like apparel, footwear, and accessories. When economic conditions weaken, due to inflation, rising interest rates, unemployment, or declining consumer confidence, people tend to reduce or delay purchases of non-essential goods. VF is especially exposed to this dynamic because many of its products fall into categories that consumers can easily cut back on during tough times. In recent years, high inflation has already forced VF to offer deeper discounts to move inventory, which has pressured both margins and earnings. If economic conditions were to worsen further, whether through a recession in the US or Europe, continued inflation, or rising interest rates, VF could face slower sales, excess inventory, and lower profitability. In addition to consumer demand, VF is exposed to instability in the retail environment. The retail industry has seen major changes, including store closures, bankruptcies, and a shift from traditional wholesale to large online platforms. If key retail partners struggle financially, VF could face order cancellations and delayed payments. Geopolitical tensions, such as ongoing conflicts in Europe and the Middle East or strained US–China relations, also add uncertainty. These issues can impact everything from consumer sentiment to supply chain reliability and tariff exposure. Weather patterns may also affect sales, especially for seasonal outdoor products like those sold under The North Face and Timberland brands. Overall, VF’s financial performance is closely tied to broader economic and political trends. When the global economy is strong and consumer sentiment is positive, VF has more room to grow through innovation, branding, and direct-to-consumer expansion. But in times of economic stress, the business is highly vulnerable to shifts in consumer behavior, retail disruption, and margin compression.

Competition is a risk for VF Corporation because the apparel, footwear, and accessories industries are fast-moving and highly saturated with global, regional, and niche players all fighting for consumer attention. VF competes on multiple fronts: against large, well-funded global brands like Nike, Adidas, and Patagonia; against private-label offerings from major retail partners; and even within its own brand portfolio for consumer relevance. Success depends on VF’s ability to anticipate and respond to changing fashion trends, maintain strong brand recognition, and deliver products that resonate with consumers in terms of design, quality, price, and values. One of the clearest examples of this risk is the recent decline of Vans. Once a strong growth engine for VF, Vans lost momentum when consumer tastes shifted and product offerings failed to keep pace. This illustrates how quickly a well-established brand can lose relevance if it misses fashion trends or fails to connect with its core audience. Timberland has faced similar challenges with stalled growth and required an asset impairment, while even The North Face, VF’s most stable brand, faces heavy pressure in a competitive outdoor market that includes strong players like Patagonia and Columbia. Beyond product appeal, VF must also compete on execution. That includes the ability to get shelf space in retail stores, reach consumers online, manage digital marketing effectively, and deliver a consistent experience across both physical and digital channels. As the retail landscape shifts more toward e-commerce and social media engagement, companies that can’t build strong digital strategies risk losing share to more agile competitors.

Relying on third-party suppliers is a risk for VF Corporation because the company does not directly control the factories that produce most of its raw materials and finished goods. Instead, it sources products from independent manufacturers, primarily located in Asia. While this model gives VF flexibility and cost advantages, it also introduces a wide range of operational and geopolitical risks that could disrupt the supply chain and impact profitability. Any number of external events could affect VF’s ability to source and deliver products on time or at a reasonable cost. Political instability, labor unrest, inflation, or changes in economic conditions in supplier countries can lead to production delays or cost increases. Trade tensions and shifting global trade policies, including tariffs, quotas, or import taxes, can increase costs significantly and limit VF’s ability to source from certain regions. The company notes that while it works to diversify its supply chain and avoid dependence on any single supplier or country, moving production is not always easy or cost-effective, especially when multiple companies in the industry are trying to do the same thing. Another risk is compliance. VF sets high standards for labor practices, environmental impact, and product quality, and it audits suppliers regularly. But it can’t monitor every aspect of day-to-day operations. If a supplier violates labor laws, uses unsafe working conditions, or delivers poor quality goods, VF could face reputational damage, regulatory penalties, and delayed or canceled shipments. These issues could disrupt operations and harm brand perception among customers. In short, while outsourcing production allows VF to operate efficiently and remain competitive on pricing, it also exposes the company to a wide range of risks that are largely outside of its control.

Reasons to invest

The Reinvent Plan is a key reason to consider investing in VF Corporation because it represents a structured, multi-phase strategy to fix the core issues that have weighed on the company’s performance and to build a stronger, more agile business. Management has acknowledged that VF was facing deeper operational and structural challenges, not just brand-specific issues, and the Reinvent Plan is designed to address those systematically. The plan is organized into three phases: reset, ignite, and accelerate. The reset phase has focused on simplifying the cost base, strengthening the balance sheet, and improving the U.S. business. At the same time, the ignite phase is about improving how the company shows up to consumers, with greater focus on product quality, design innovation, merchandising, and brand building. These two phases are already running in parallel and laying the groundwork for the final phase, which is to accelerate growth once the foundation is stronger. One of the most encouraging signs is that the first phase of the plan has already delivered more than $300 million in cost savings. These savings are not just about cutting expenses, they are being reinvested into areas that support long-term growth, such as product development, supply chain efficiency, and digital operations. VF is also beginning to see early benefits from the second phase of the plan, which targets an additional $500 to $600 million in operating profit improvements through better gross margin management and lower overhead. This early progress was visible in the most recent quarter, where operating income and margins exceeded expectations even though revenue was flat. That shows the improvements are not just theoretical, they are beginning to show up in results.

The Vans turnaround is a reason to consider investing in VF Corporation because it reflects a focused, disciplined strategy to rebuild one of the company’s most important brands in a sustainable and profitable way. While recent headline numbers show steep declines in Vans’ revenue, much of that drop has been intentional. Management has taken deliberate steps to clean up the brand’s distribution, reduce reliance on unprofitable sales channels, and reset its presence in key markets like China and the U.S. In fact, about 60 percent of the FY 2025 sales decline came from decisions to exit lower-margin doors, reduce inventory in certain channels, and close underperforming stores, moves that are designed to protect and eventually improve the brand’s long-term health. These changes are already having a positive impact on gross margins at Vans, which are up significantly year over year, suggesting that the foundation is being rebuilt with profitability in mind. At the same time, the company is launching new products to spark interest in the brand again, especially among women and younger shoppers, where early signs are encouraging. One recent release, the Super Low Pro, sold out quickly in popular colors, showing that when Vans puts out fresh and trendy styles, customers respond well. Management is also working to improve how the brand is presented to shoppers by upgrading stores, improving its online presence, and focusing more on important retail partners. Even though overall sales are down, products sold at regular price through key retail partners are performing well, some stores are seeing stable sales, and others are reporting double-digit growth. This suggests that interest in Vans remains strong where the brand is most focused, and that the demand from consumers is better than the headline revenue numbers might suggest. Looking ahead, the impacts of store closures, channel reductions, and other reset actions will fade gradually over the next few quarters, and management expects them to be largely behind the business by the end of the fiscal year. As these headwinds ease, the path will be clearer for growth to return, fueled by new product launches, improved marketing, and a stronger, more focused distribution strategy. The company is also applying lessons learned from successful turnarounds at other brands like Timberland, which gives added confidence that the Vans recovery is on track.

Portfolio optimization is a reason to invest in VF Corporation because it reflects a disciplined, long-term strategy to focus the business on its strongest, most promising brands while exiting assets that don’t align with the company’s broader goals. Over the past five years, VF has reduced its brand count from 32 to 12, sharpening its focus on those brands that are well-established in categories with consistent consumer demand. This streamlining allows management to concentrate investment, talent, and marketing on fewer, higher-potential businesses, creating more brand-building power and operational efficiency across the portfolio. A key example of this strategy in action was the recent sale of Supreme. While Supreme is a well-known brand, management concluded that its standalone business model did not fit with VF’s integrated multi-brand approach. Selling it for $1,5 billion in cash not only eliminated a brand with limited synergies but also strengthened the company’s balance sheet. This gives VF greater flexibility to reinvest in core brands, reduce debt, and position itself for more stable long-term growth. Management has also made it clear that they will continue to review the portfolio regularly and are willing to exit brands that no longer align with the company’s strategy. This focus is already producing results. The North Face continues to show strong performance, with growth in both direct-to-consumer and wholesale channels. The brand’s momentum is backed by successful product lines in outerwear and footwear, along with an expanded design calendar that now includes four seasons instead of two. This shift allows the brand to be more competitive across all parts of the year, not just winter, and should support more consistent product innovation and sales growth going forward. Similarly, Timberland posted strong revenue growth with fewer discounts, showing that the brand is gaining traction and expanding margins at the same time. By narrowing its focus to brands like The North Face and Timberland that show strong consumer demand, pricing power, and room to grow across categories and regions, VF is building a more resilient and strategically aligned portfolio. This positions the company to operate more efficiently, make better investment decisions, and create long-term shareholder value.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 0,74, which is the adjusted EPS from fiscal year 2025. I have selected a projected future EPS growth rate of 7% (Finbox expects EPS to grow by 6,6%). Additionally, I have chosen a projected future P/E ratio of 14, which is twice the growth rate. This decision is based on the fact that the VF Corporation has historically had a higher P/E ratio. Lastly, our minimum acceptable rate of return is already set at 15%. Doing the calculations, we come up with the sticker price (some call it fair value or intrinsic value) of $5,04. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy the VF Corporation at a price of $2,52 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that an owner of a company (or stock) receives on the purchase price of the company is essentially its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 465, and capital expenditures were 86. I attempted to review their annual report to calculate the proportion of capital expenditures allocated for maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 60 in our calculations. The tax provision was 76. We have 389,6 outstanding shares. Hence, the calculation will be as follows: (465 – 60 + 76) / 389,6 x 10 = $12,35 in Ten Cap price.

The final calculation is referred to as the Payback Time price. It is a calculation based on the free cash flow per share. With the VF Corporation's free cash flow per share at $0,97 and a growth rate of 7%, if you want to recoup your investment in 8 years, the Payback Time price is $10,65.

Conclusion

VF Corporation is an intriguing company going through a challenging period, led by a strong management team with a history of successful turnarounds. The company has built a moat through brand equity, global scale, a flexible supply chain, a growing direct-to-consumer business, and high standards in responsible sourcing. While recent years have seen weak returns on capital and low free cash flow, management expects both to improve over time. However, the company carries a high level of debt, which, despite management’s commitment to reduce it, remains a concern and requires monitoring. Macroeconomic conditions are a risk because VF’s sales depend heavily on consumer spending for non-essential goods, which tends to fall during periods of inflation, high interest rates, or economic uncertainty. These pressures can reduce demand, compress margins, and disrupt supply chains. Competition is another risk, as VF operates in a fast-moving industry where brand relevance and product innovation are essential. Global rivals, private labels, and shifting retail dynamics pose a constant threat, and even established brands like Vans and Timberland have struggled when they failed to adapt. The reliance on third-party suppliers also adds risk, as it limits VF’s control over production quality, timing, and labor practices, with most sourcing done in regions vulnerable to political and economic instability. On the positive side, the Reinvent Plan is a compelling reason to watch VF, as it offers a structured approach to addressing operational weaknesses and rebuilding profitability. Early results such as cost savings and margin improvements suggest real progress. The Vans turnaround is another reason for cautious optimism, with management taking deliberate steps to reset the brand, exit unprofitable channels, improve margins, and introduce new products that are already gaining traction. As the short-term reset winds down, stronger product and marketing efforts should pave the way for renewed growth. Portfolio optimization also supports the long-term case, with VF streamlining its brand lineup and focusing resources on core labels with clear consumer demand. The recent sale of Supreme illustrates this disciplined approach, strengthening the balance sheet and freeing up capital to invest in brands like The North Face and Timberland, which continue to perform well. Given the high debt and the uncertainties about the turnaround, I don’t feel confident investing in VF Corporation right now.

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