Don’t tell VF Corp. shareholders that global warming is a hoax.
Last week when it reported quarterly earnings, the Greensboro-based apparel company missed its estimate by six cents a share, the most in recent memory, CEO Eric Wiseman said on the company’s quarterly conference call. Much of the blame, he said, stemmed from the warmest winter on record.
The news rattled investors, with VF shares declining 4.4% to about $58.50, a 25% decline from the record high of last summer. Warm weather or not, the company earned $1.1 billion last year.
It didn’t take long for people to realize the stock slide was an overreaction: Shares rebounded almost 5% in early trading Monday to $61 after Nomura Securities and other investment companies recommended VF.
Wiseman also cited weakening sales for working people, related to the slowdown in the oil patch and manufacturing. Work wear has the best earnings potential of VF’s brands, Wiseman said, but it’s “really on its heels now.” VF’s main work wear brands are Bulwark and Red Kap.
VF’s shares were due a pause given its stunning rebound since the 2007-09 recession. Shares increased more than sixfold between 2008 and last year as the company earned plaudits for its savvy management. VF hasn’t made an acquisition in four years, focusing on making its $2 billion Timberland purchase in 2011 pay off.
Wiseman hinted that a deal is brewing, noting he’s looking at the company’s entire portfolio. “We think it’s likely something will change this year.” Nomura analyst Robert Drbul noted Monday that declines in rival, smaller apparel companies makes a deal more likely. “We would welcome a much-anticipated, one-strategy meaningful acquisition,” he wrote.
Sales of VF’s most heralded brand, The North Face, slowed to a 5% increase last year, compared with 12% a year earlier. Not a great need to wear that North Face when it’s 60 degrees in December. But 5% growth remains impressive: It was one of the company’s five brands that make up more than 65% of annual sales.
VF has a great history, raising dividends for 43 straight years (its yield is now 2.5%) and producing more than 500 million apparel products annually, spread over more than 30 brands. About 30% of sales come from overseas, and it owns 1,400 stores to help it move inventory when things slow down.
Or, as was the case last year, when things warm up.