This is an abridged version of this note. You can find the complete deep dive note at our website here: M Squared Capital
We appreciate all the work that VF Corp management has put into turning around the business and believe it will ultimately pay off longer-term with outsized shareholder returns. But the top-line of the business is a major concern right now as doesn’t seem like we can expect an inflection in Vans anytime soon and The North Face is up against a difficult winter comparison from last year…
The main driver of multiple expansion will likely always remain underlying growth in the business…In this regard Vans is the most critical brand to stabilize, and we took a deep look into the current state of that business in this note…
We also dug into consensus estimates which appear a bit of a mess on revenue. We believe the reasonable range of EPS outcomes this year is $0.65 to $0.90 but are more positively biased than the current Street estimate of $0.75…
While we acknowledge the bull case and admit it’s a reasonable outcome, the reason why most people can’t visualize the bear case is likely because of survivorship bias…
They used to say (as recently as 3Q25) major reset actions would be complete by the end of FY25 so appears the timeline came in a bit behind schedule…
While the goal is to generate $500-$600 mm in EBIT expansion by FY28, they clearly state they will “reinvest a portion of cost savings to drive profitable and sustainable growth” in the near-to-medium term. This is one of the largest challenges facing bulls of the story today, as the new goal requires improvements in product creation and integrated business planning that are certainly much harder to prove out…
But where we really have pause for concern with the idea that all restructuring actions are over is towards the physical store footprint…
Investors can easily comprehend how restructuring actions can help improve profitability, but they often can be much more skeptical towards LT growth projections in brands that simply aren’t growing…
We see nothing to indicate a potential inflection in core trends for the Vans brand over the next several quarters…
The bull thesis is that trends start in luxury and therefore we are on the cusp of new interest in Skate. While that might be true, it often takes several years for those kinds of trends to work their way down into mass…
Bracken’s recent commentary also doesn’t sound like we should expect much from Vans anytime soon..
Our concern towards this subject is even greater as there is ample Knu Skool product on sale. To remind everybody, Sun was exceptionally bullish on this franchise during the investor day earlier this year…
Teen/early adult retailer Buckle recently had great results with a 7.3% comp increase yet the silhouettes/brands they carry are significantly different than anything in the Skate category…
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FIN