2022 Week 22: VF Corp (NYSE: VFC)

Portfolio Update

The FiveTwenty portfolio received no dividends in the past week.

Past Week Dividend$0
Current Quarter Dividend (Q2 2022)$467.64
LifeTime Dividend$3,752.31
Estimated Annual Dividend$5,282.00
Dividend Scorecard

The capital allocation for the week of 05/29/2022 to 06/04/2022 will be used to add to our position in VF Corp (NYSE: VFC).

VFC – Position Update

Since our last check-in on VFC in week 48 of 2021, the company reported Q3 2022 earnings of 01/28/2022, and Q4 and full year 2022 earnings on 05/19/2022. In addition, the share prices decreased 32.2% from $73.98 to $50.18.

TTMPrev. Update10-year median
Dividend Streak49 years49 years
Yield3.95%2.65%2.28%
Payout Ratio62.07%175.96%2
P/E15.73128.672
Entry Criteria Scorecard

1 computed using adjusted TTM EPS of $3.19 as of Q4 2022
2 computed using adjusted TTM EPS of $2.58 as of Q2 2022

FY 2022 earnings report

Did VFC’s latest earnings report raise any warning flags?

For FY 2022, VFC posted sales growth across the entire family of brands. Sales for Vans grew 20%, The North Face 33%, Timberland 20%, Dickies 19%, and all other brands 60%. Despite this a weaker outlook following Q3 2022 earnings precipitated a sharp decline in the share price of the company. Overall, revenue grew 28.2%, net income increased 239%, and adjusted EPS were 144% higher than in FY 2021.

Revenue
(in millions)
Net Income
(in millions)
Adj. EPS
.
2021$9,239$408$1.30
2022$11,842$1,387$3.18
% Change28.2%239%144%

Additional noteworthy developments during the quarter:

  • VFC returns $1.1 billion to shareholder in FY 2022 through $773 million in dividends and $350 million of share repurchases.
  • As part of the earnings result, VFC also declare a quarterly dividend of $0.50 per share payable on 06/21/2022 to shareholders of record on 06/10/2022.
  • For FY 2022, the company increased operating margin 720 basis points and adjusted operating margin 510 basis points.

Looking ahead, VFC forecasts an increase of revenue of at least 7% and EPS of $3.30 to $3.40. The company also expects capital expenditures to be approximately $250 million for the year.

Thesis

Why are we adding to our position in VFC?

We continue to believe in the strength of VFC’s business due to its collection of popular brands. The company earnings recovered well in 2022 from the COVID-19 effects experienced during FY 2021.

Misses in execution in the second half of FY 2022, lead to a sharp decline in the share price. We view this decline as a buying opportunity with the expectation that the company will be able to fix issues that impacted second half of FY 2022 in short order.

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