Supreme Parent VF Corp's Growth Depends On Vans Reboot: Analyst Points To Innovation As Key For Turnaround

Wedbush analyst Tom Nikic reiterated a Neutral rating on the shares of VF Corp VFC with a $21 price target.

The analyst thinks the athletic footwear brand Vans did not have sufficient product innovation after its surge late last decade.

A lack of compelling product innovation has led to reductions in conversion, purchase frequency, and items per basket for Vans. So, the analyst believes product innovation can lead to a turnaround.

The shining star of the portfolio of late, according to the analyst, has been The North Face (TNF), with strong outdoor industry and company-specific drivers.

With TNF having a higher marketing ratio as percent of revenue than the company average, the trend is expected to fuel multi-year growth for the brand, said the analyst.

While VFC has a long history of putting cash to work, deleveraging the balance sheet is the first priority right now, noted the analyst.

When the leverage ratio comes down, they'll start looking at M&A again, focusing on strong brands that just need a little boost from VFC's infrastructure, added the analyst.

The analyst said that despite the underperformance of the company's most recent acquisition, streetwear brand Supreme, the initial thesis of geographic expansion unlocking growth remains a big opportunity.

The company CEO Bracken Darrell's lack of background in apparel or footwear will infuse a new perspective to the company, which may be needed given the recent travails, observed the analyst.

While VFC has a broad portfolio of 12 brands across multiple sub-categories, at this time, the direction of the stock is likely to be driven by a single brand Vans, concluded the analyst.

Price Action: VFC shares are trading higher by 1.48% at $19.52 on the last check Tuesday.