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VF Corporation – 2011
Forest David
A.
Case Abstract
VF Corp. is a comprehensive strategic management case that includes the company’s year-end 2010
financial statements, organizational chart, competitor information and more. The case time setting is the
year 2011. Sufficient internal and external data are provided to enable students to evaluate current
strategies and recommend a three-year strategic plan for the company. Headquartered in Greensboro,
North Carolina, VF Corp’s common stock is publicly traded under the ticker symbol VFC.
VF Corp. is a global leader in branded apparel with more than 30 brands. The company’s top six brands are
The North Face, Wrangler, Timberland, Vans, Lee, and Nautica. As the #1 jeans maker worldwide, VF has
leading denim brands, such as Lee, Riders, Rustler, Wrangler, 7 For All Mankind, and Rock and Republic.
Other VF brands include JanSport and Eastpak (backpacks), The North Face and Eagle Creek (outdoor
gear), Red Kap and Bulwark (work clothes), Nautica (sportswear), Lucy Activewear (athletic apparel),
John Varvatos (menswear), and Vans (footwear). VF's Majestic label features licensed MLB, NFL, and
NBA apparel. VF operates excellent e-commerce sites for its brands and owns more than 750 stores
worldwide. VF brands are sold in department and specialty stores, mass merchants, and discounters.
B.
Vision Statement (actual)
We will grow by building leading lifestyle brands that excite consumers around the world.
C.
Mission Statement (actual)
Ours is a perpetually driven culture, focused on constant innovation (4). Using deep research and insights,
we combine the art and science of apparel to create products that excite consumers and brands that inspire
loyalty (5,7).
We responsibly manage the industry's most efficient and complex supply chain, which spans multiple
geographies (3), product categories and distribution channels.
Our goal is to continuously exceed the expectations of our consumers, customers (1), shareholders and
business partners (6). We help our retail partners win with consistently solid execution and outstanding
service. And we continually find ways to improve our performance and generate bottom line results.
Our people are the source of our success (9). VF associates share a deep commitment to diversity - in
people and ideas. We conduct business with the highest levels of honesty and integrity (8) and we foster a
positive working environment based on creativity, collaboration, and congeniality.
These are the things
that make us great. These are the things that make us VF.
1.
2.
3.
4.
Customers
Products or services
Markets
Technology
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall.
5.
6.
7.
8.
9.
D.
Concern for survival, growth, and profitability
Philosophy
Self-concept
Concern for public image
Concern for employees
External Audit
Opportunities
1.
2.
3.
4.
5.
6.
7.
8.
9.
Eastern Europe is a fast growing market with Ukraine leading the way.
Baby boomers are the largest per capita consumers of apparel.
71 million teens in the US are maturing into young adults.
Consumers 20-34 account for 24% of the appeal spending in the US.
Consumers make choices at the last second and styles must be adaptable.
Social media enables retailers to listen to customers in real time.
US consumers spent $192 billion in 2010 on apparel.
Southeast Asia has many skilled workers trained in apparel.
There continues to be reduced trade regulations and elimination of tariffs.
Threats
1.
2.
3.
4.
5.
6.
7.
Gap, Timberland, Nike, Adidas, and Reebok are all strong competitors.
Product life cycles are short and fashion trends can change quickly.
Timely delivery and low cost transportation and oil from supply chain being over seas.
US is still suffering from high unemployment around 9% and low home prices.
Cotton prices are up over 100% from 2009.
Many consumers are obsessed with promotional pricing.
Volatile nature of world currency rates.
Competitive Profile Matrix
VF Corp.
Critical Success Factors
Advertising
Market Penetration
Product Variety
Store Locations
R&D
International Markets
Financial Profit
Customer Loyalty
Market Share
Product Quality
Top Management
Price Competitiveness
Totals
Weight
0.09
0.11
0.07
0.10
0.08
0.06
0.10
0.09
0.10
0.08
0.04
0.08
1.00
Rating
3
3
4
4
3
3
1
3
4
4
3
3
Score
0.27
0.33
0.28
0.40
0.24
0.18
0.10
0.27
0.40
0.32
0.12
0.24
3.15
GAP
Rating
2
2
3
3
2
2
3
2
2
2
2
4
Score
0.18
0.22
0.21
0.30
0.16
0.12
0.30
0.18
0.20
0.16
0.08
0.32
2.43
Nike
Rating
4
4
2
1
4
4
4
4
3
3
4
2
Score
0.36
0.44
0.14
0.10
0.32
0.24
0.40
0.36
0.30
0.24
0.16
0.16
3.22
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall.
EFE Matrix
1.
2.
3.
4.
5.
6.
7.
8.
9.
Weight Rating Weighted Score
Opportunities
Eastern Europe is a fast growing market with Ukraine leading the
0.10
4
0.40
way.
Baby boomers are the largest per capita consumers of apparel.
0.04
2
0.08
71 million teens in the US are maturing into young adults.
0.07
3
0.21
Consumers 20-34 account for 24% of the appeal spending in the
0.07
4
0.28
US.
Consumers make choices at the last second and styles must be
0.06
3
0.18
adaptable.
Social media enables retailers to listen to customers in real time.
0.04
2
0.08
US consumers spent $192 billion in 2010 on apparel.
0.07
3
0.21
Southeast Asia has many skilled workers trained in apparel.
0.06
2
0.12
There continues to be reduced trade regulations and elimination
0.05
3
0.15
of tariffs.
Threats
1. Gap, Timberland, Nike, Adidas, and Reebok are all strong
competitors.
2. Product life cycles are short and fashion trends can change
quickly.
3. Timely delivery and low cost transportation and oil from supply
chain being over seas.
4. US has high unemployment around 9% and low home prices.
5. Cotton prices are up over 100% from 2009.
6. Many consumers are obsessed with promotional pricing.
7. Volatile nature of world currency rates.
TOTALS
E.
Weight Rating Weighted Score
0.10
2
0.20
0.09
3
0.27
0.05
2
0.10
0.05
0.06
0.05
0.04
1.00
2
2
2
1
0.10
0.12
0.10
0.04
2.64
Internal Audit
Strengths
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Diversity of products (more than 25 brands).
Largest branded apparel company in the world.
Excellent organizational structure with 5 distinct SBUs.
Produces around 34% of what it sells.
International revenues account for 30% of revenues.
Opened 15 new stores in first quarter 2011 bringing total number of owned retail stores t o788.
Weathered the 2008-2009 recession better than competitors.
EPS of $6.20.
Stock price increased from $40 to $140 or 140% from 2009 to year end 2011.
Detailed mission statement.
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall.
Weaknesses
1.
2.
3.
4.
5.
6.
7.
8.
Current Ratio of 1.5 compared to 3.0 for the industry suggests VF is more highly leveraged than
competition.
Receivables turnover is only 6.7 compared to 38 for the industry.
Revenues have not increased in the last 3 years.
Property, Plant, & Equipment remained the same.
Approximately $2.5 billion or 40% of assets come from goodwill or intangibles.
Many consumers know the brands but not the company (VF).
Sportswear, Contemporary Brands and Other segments are not operating efficiently.
Currently paying over 18% of revenue for labor.
Financial Ratio Analysis
Growth Rate Percent
Sales (Qtr vs year ago qtr)
Net Income (YTD vs YTD)
Net Income (Qtr vs year ago qtr)
Sales (5-Year Annual Avg.)
Net Income (5-Year Annual Avg.)
Dividends (5-Year Annual Avg.)
VF Corp.
23.20
NA
23.90
6.38
3.50
17.18
Industry
26.10
NA
48.30
15.36
25.71
8.24
S&P 500
14.40
NA
48.60
8.29
8.71
5.64
Profit Margin Percent
Gross Margin
Pre-Tax Margin
Net Profit Margin
5Yr Gross Margin (5-Year Avg.)
45.7
10.2
7.9
43.8
48.8
12.7
9.0
45.0
39.5
18.1
13.2
39.8
Liquidity Ratios
Debt/Equity Ratio
Current Ratio
Quick Ratio
0.67
1.5
0.8
0.44
3.0
1.8
0.96
1.2
0.8
Profitability Ratios
Return On Equity
Return On Assets
Return On Capital
Return On Equity (5-Year Avg.)
Return On Assets (5-Year Avg.)
Return On Capital (5-Year Avg.)
16.3
8.1
10.5
15.9
9.1
11.0
16.8
11.3
14.3
16.2
10.3
11.8
25.9
8.9
11.8
23.8
8.0
10.8
14,632
184,579
6.5
3.1
20,595
267,559
37.6
3.6
126,810
1 Mil
15.3
12.3
Efficiency Ratios
Income/Employee
Revenue/Employee
Receivable Turnover
Inventory Turnover
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall.
Net Worth Analysis (in millions)
Stockholders' Equity
Net Income x 5
(Share Price/EPS) x Net Income
Number of Shares Outstanding x Share Price
Method Average
$3,861
$2,855
$12,566
$14,960
$8,560
Bebe Stores Net Worth Analysis (in millions)
Stockholders' Equity
Net Income x 5
(Share Price/EPS) x Net Income
Number of Shares Outstanding x Share Price
Method Average
$ 352,353
$ (8,895)
$ (669,794)
$
634
$ (81,425)
IFE Matrix
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
1.
2.
3.
4.
5.
6.
7.
8.
9.
Weight Rating Weighted Score
Strengths
Diversity of products (more than 25 brands).
0.10
4
0.40
Largest branded apparel company in the world.
0.10
4
0.40
Excellent organizational structure with 5 distinct SBUs.
0.07
4
0.28
Produces around 34% of what it sells.
0.05
4
0.20
International revenues account for 30% of revenues.
0.04
4
0.16
Opened 15 new stores in first quarter 2011 bringing total number
0.03
4
0.12
of owned retail stores to 788.
Weathered the 2008-2009 recession better than competitors.
0.03
4
0.12
EPS of $6.20.
0.04
4
0.16
Stock price increased from $40 to $140 or 140% from 2009 to year
0.06
4
0.24
end 2011.
Detailed mission statement.
0.03
4
0.12
Weight Rating Weighted Score
Weaknesses
Current Ratio of 1.5 compared to 3.0 for the industry suggests
0.04
1
0.04
VF is more highly leveraged than competition.
Receivables turnover is only 6.7 compared to 38 for the industry. 0.06
1
0.06
Revenues have not increased in the last 3 years.
0.05
1
0.05
Property, Plant, & Equipment remained the same.
0.05
1
0.05
Approximately $2.5 billion or 40% of assets come from goodwill
0.08
1
0.08
or intangibles.
Many consumers know the brands but not the company (VF).
0.07
1
0.07
Sportswear, Contemporary Brands and Other segments are not
0.04
2
0.08
operating efficiently.
Currently paying over 18% of revenue for labor.
0.06
2
0.12
0.00
0
0.00
0
TOTALS
1.00
2.75
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall.
F.
SWOT
SO Strategies
1.
2.
3.
Build 100 new stores in Eastern Europe (S1, S2, S5, S6, O1, O9).
Develop line of products attractive to Baby boomers (S1, S2, O2).
Increase from 34% to 50% production of own products (S4, O5).
WO Strategies
1.
2.
3.
Build 100 new stores in Eastern Europe (W4, O1, O9).
Introduce and advertising campaign to ensure customers associate all of VF Corp’s brands with the VF
Corp. (W6, O6, O7).
Acquire Bebe Stores (W4, O3, O4, O7).
ST Strategies
1.
2.
Increase from 34% to 50% production of own products (S4, T2).
Open 5 new production plants in the United States (S1, S2, S3, T2, T3).
WT Strategies
1.
2.
Expand accounting staff to aid in collections (W2, T1).
Liquidate Sportswear, Contemporary Brands, and Other segments (W7, T1).
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G.
SPACE Matrix
FP
Conservative
Aggressive
7
6
5
4
3
2
1
CP
-7
-6
-5
-4
-3
-2
-1
1
2
3
4
5
6
7
IP
-1
-2
-3
-4
-5
-6
-7
Defensive
Internal Analysis:
Financial Position (FP)
Return on Equity (ROE)
Leverage
Liquidity
Working Capital
Cash Flow
Financial Position (FP) Average
Internal Analysis:
Competitive Position (CP)
Market Share
Product Quality
Customer Loyalty
Technological know-how
Control over Suppliers and Distributors
Competitive Position (CP) Average
SP
Competitive
4
5
3
3
3
3.6
External Analysis:
Stability Position (SP)
Rate of Inflation
Technological Changes
Price Elasticity of Demand
Competitive Pressure
Barriers to Entry into Market
Stability Position (SP) Average
-2
-2
-2
-4
-2
-2.4
-3
-2
-2
-3
-2
-2.4
External Analysis:
Industry Position (IP)
Growth Potential
Financial Stability
Ease of Entry into Market
Resource Utilization
Profit Potential
Industry Position (IP) Average
4
3
4
4
4
3.8
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall.
H.
Grand Strategy Matrix
Rapid Market Growth
Quadrant I
Quadrant II
Strong
Competitive
Position
Weak
Competitive
Position
VF Corp.
Quadrant IV
Quadrant III
Slow Market Growth
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall.
I.
The Internal-External (IE) Matrix
The Total IFE Weighted Scores
Strong
4.0 to 3.0
4.0
I
Average
2.99 to 2.0
II
3.0
IV
V
Weak
1.99 to 1.0
III
VI
High
Outdoor/Action
The
EFE
Total
Medium
Weighted
Scores
2.0
Imagewear
Jeanswear
VIII
VII
IX
Low
Sportswear
1.0
(in millions)
Product Class
Outdoor/Actionwear
Jeanswear
Imagewear
Sportswear
Contemporary Brands
Other
Revenues
2010
$3,205
2,538
909
498
439
114
Profits
2010
$642
432
111
52
14
(61)
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall.
J.
QSPM
Increase
advertising
by 20%
Weight
Opportunities
1. Eastern Europe is a fast growing market with Ukraine leading the
0.10
way.
2. Baby boomers are the largest per capita consumers of apparel.
0.04
3. 71 million teens in the US are maturing into young adults.
0.07
4. Consumers 20-34 account for 24% of the appeal spending in the
0.07
US.
5. Consumers make choices at the last second and styles must be
adaptable.
6. Social media enables retailers to listen to customers in real time.
7. US consumers spent $192 billion in 2010 on apparel.
8. Southeast Asia has many skilled workers trained in apparel.
9. There continues to be reduced trade regulations and elimination
of tariffs.
Threats
1. Gap, Timberland, Nike, Adidas, and Reebok are all strong
competitors.
2. Product life cycles are short and fashion trends can change
quickly.
3. Timely delivery and low cost transportation and oil from supply
chain being over seas.
4. US has high unemployment around 9% and low home prices.
5. Cotton prices are up over 100% from 2009.
6. Many consumers are obsessed with promotional pricing.
7. Volatile nature of world currency rates.
Add 100
stores in
Eastern
Europe
AS
TAS
AS
TAS
2
0.20
4
0.40
3
3
0.12
0.21
1
1
0.04
0.07
3
0.21
1
0.07
0.06
0
0.00
0
0.00
0.04
0.07
0.06
4
3
1
0.16
0.21
0.06
2
1
3
0.08
0.07
0.18
0.05
1
0.05
4
0.20
Weight
AS
TAS
AS
TAS
0.10
2
0.20
3
0.30
0.09
0
0.00
0
0.00
0.05
0
0.00
0
0.00
0.05
1
0.05
2
0.10
0.06
0.05
0.04
0
0
1
0.00
0.00
0.04
0
0
3
0.00
0.00
0.12
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall.
Increase
advertising
by 20%
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
1.
2.
3.
4.
5.
6.
7.
8.
9.
K.
Add 100
stores in
Eastern
Europe
Weight
Strengths
Diversity of products (more than 25 brands).
0.10
Largest branded apparel company in the world.
0.10
Excellent organizational structure with 5 distinct SBUs.
0.07
Produces around 34% of what it sells.
0.05
International revenues account for 30% of revenues.
0.04
Opened 15 new stores in first quarter 2011 bringing total number
0.03
of owned retail stores to 788.
Weathered the 2008-2009 recession better than competitors.
0.03
EPS of $6.20.
0.04
Stock price increased from $40 to $140 or 140% from 2009 to year
0.06
end 2011.
Detailed mission statement.
0.03
AS
0
2
1
0
2
TAS
0.00
0.20
0.07
0.00
0.08
AS
0
3
2
0
4
TAS
0.00
0.30
0.14
0.00
0.16
2
0.06
4
0.12
0
2
0.00
0.08
0
3
0.00
0.12
2
0.12
3
0.18
0
0.00
0
0.00
Weight
Weaknesses
Current Ratio of 1.5 compared to 3.0 for the industry suggests
0.04
VF is more highly leveraged than competition.
Receivables turnover is only 6.7 compared to 38 for the industry. 0.06
Revenues have not increased in the last 3 years.
0.05
Property, Plant, & Equipment remained the same.
0.05
Approximately $2.5 billion or 40% of assets come from goodwill
0.08
or intangibles.
Many consumers know the brands but not the company (VF).
0.07
Sportswear, Contemporary Brands and Other segments are not
0.04
operating efficiently.
Currently paying over 18% of revenue for labor.
0.06
0.00
0
TOTALS
AS
TAS
AS
TAS
0
0.00
0
0.00
0
0
1
0.00
0.00
0.05
0
0
4
0.00
0.00
0.20
0
0.00
0
0.00
3
0.21
1
0.07
0
0.00
0
0.00
0
0
0.00
0.00
0
2
0.00
0.00
2.38
2.92
Recommendations
1. Build 100 new stores in Eastern Europe at $1.5M each for $150M.
2. Acquire Bebe Stores for $350M.
3. Increase advertising by $100M.
L.
EPS/EBIT Analysis (in millions)
Amount Needed: $600
Stock Price: $136
Shares Outstanding: 110
Interest Rate: 5%
Tax Rate: 24%
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall.
EBIT
Interest
EBT
Taxes
EAT
# Shares
EPS
Common Stock Financing
Recession
Normal
$700
$900
0
0
700
900
168
216
532
684
114
114
4.65
5.98
EBIT
Interest
EBT
Taxes
EAT
# Shares
EPS
Recession
$700
24
676
162
514
111
4.63
M.
20 Percent Stock
Normal
$900
24
876
210
666
111
6.00
Boom
$1,200
0
1,200
288
912
114
7.97
Recession
$700
30
670
161
509
110
4.63
Debt Financing
Normal
$900
30
870
209
661
110
6.01
Boom
$1,200
30
1,170
281
889
110
8.08
Boom
$1,200
24
1,176
282
894
111
8.06
Recession
$700
6
694
167
527
114
4.65
80 Percent Stock
Normal
$900
6
894
215
679
114
5.98
Boom
$1,200
6
1,194
287
907
114
7.99
Epilogue
V.F.’s third-quarter 2011 adjusted earnings of $2.87 per share surpassed earnings of $2.22 per share in the
prior-year quarter. V.F. Corp.'s third quarter revenue of $2,750.1 million exceeded the prior year figure by
23.0 percent. Double-digit revenue growth at all V.F. Corp.'s coalitions led to the overall climb. The
company’s operating income increased 21.3 percent compared to the prior year, to reach $430.1 million.
V.F. is a well managed company performing nicely in an uncertain economic environment.
Revenue at V.F.’s Outdoor & Action Sports jumped 37 percent in the third quarter of 2011 from the yearago quarter to $1,436.8 million, of which Timberland acquisition contributed $163.6 million. Timberland
was acquired in 2000 as a bankrupt business but has become V.F. leading brand. Business from both the
Americas and beyond contributed to V.F.’s revenue increase in the third quarter. The company’s America's
revenue grew by 13 percent while International revenue increased 38 percent. V.F.’s Jeanswear revenue
increased 8 percent to $613.4 million. The company’s Imagewear revenue increased 14 percent in the
quarter to $277.6 million while revenue at the company’s Sportswear division improved 18 percent in the
third quarter to $151.8 million. The company’s Contemporary Brands revenue rose 11 percent to $126.2
million.
In total for the third quarter of 2011, V.F. Corp.’s international revenues increased 44.0 percent, largely
driven by solid growth in the Outdoor & Action Sports and Jeanswear businesses, along with strength
across the biggest brands in Asia and Europe. Timberland contributed 15.0 percent to this growth. Also
doing well, the company’s direct-to-consumer revenue increased 21.0 percent in the quarter, driven by new
store openings and Timberland acquisition. During that quarter, VF Corp. opened 32 stores across diverse
brands, bringing the total number of owned retail stores to 1,077.
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall.
V.F.’s Board of Directors recently declared a quarterly cash dividend of $0.72 per share, an increase of 14
percent. The dividend is payable on December 19, 2011. This marks the 39th consecutive year of higher
dividend payments to shareholders of V.F. Corp.
Copyright ©2013 Pearson Education, Inc. publishing as Prentice Hall.