J.P. Morgan analyst Matthew Boss reduced his rating on VF Corp. to “Underweight” from “Neutral” due to a slower-than-expected turnaround at Vans and moderating revenue growth at The North Face across Europe, the Asia-Pacific and Timberland overall.
In a note, Boss said that while Vans is seeing “green shoots,” noting the management on its recent quarterly call cited product strength with the super low pro, Skate Loafer, and embellished Old Skool and Slip Ons silhouettes, as well as marketing/collaboration “wins” following partnerships with Valentino and K-Pop Demon Hunters, and with SZA as the brand’s artistic director, he also said management noted that little of Vans’ footwear assortments have been developed “start to finish” under the leadership of President Sun Choe, who joined VF from Lululemon in July 2024, given lengthy lead times. Boss wrote, “On timing, management cited the next 12-to-18 months will begin to have more of S. Choe’s influence, with Back-to-School 2026 more of Sun’s influence (though not 100 percent all of it).”
Boss also noted that while Vans’ global e-commerce sales returned to growth for the first time in over four years, led by the Americas, traffic declines for the brand are still occurring in U.S. stores. With DTC stores and wholesale estimated to represent between 60 percent and 70 percent of the channel mix at Vans, Boss estimates Vans stores/wholesale sales were down over 15 percent in the fiscal third quarter, “representing a constraint on forward revenue growth in our view.”
Among other major brands, Boss noted that management at VF Corp. expects Timberland to expand at a “slower pace” in the current fiscal fourth quarter as it tries to reduce its reliance on the popularity of the yellow boot. Based on VF’s second-half guidance, Boss sees flat sales for Timberland in the current fiscal fourth quarter versus Wall Street estimates calling for currency-neutral growth of 2.2 percent.
Boss is more upbeat on The North Face, expecting sales gains on a currency-neutral basis of 4.2 percent for VF’s fiscal 2027 year, above analysts’ consensus target of 3.1 percent. However, he noted VF’s results remain “mixed” with the FY27 forecast forecasted on 10 percent growth in the Americas but partly offset by flat to slightly down revenues on a currency-neutral basis in Europe and APAC. He said the Americas is expected to benefit as VF’s management “believes the brand stands underpenetrated and with runway to ‘elevate’ through more premium product/presentations,” while international regions have lost some momentum from robust growth in recent years.
Finally, Boss expects VF’s margins to reach 8.4 percent in fiscal 2028, below the company management’s target of 10 percent set at its October 2024 Investor Day. He noted that VF’s management is “now clarifying the target as on a ‘run-rate’ exiting FY28 basis,” with Boss estimating progress in improving margins will be offset by shortfalls in lowering its expense rate.
Along with a downgrade, Boss trimmed his price target for VFC by a dollar to $18 and lowered the FY27 EPS estimate to 99 cents versus a consensus estimate of $1.03 and the FY28 EPS to $1.26 versus a consensus estimate of $1.29 based on 2.5 percent revenue growth on average over the next two years compared to street estimates of 3.1 percent revenue growth.
Image courtesy Vans
