In an attempt to enhance its portfolio structure, V.F. Corporation VFC revealed plans to seek strategic options for its Licensed Sports Group (“LSG”) unit, which forms part of the company’s Imagewear segment.
The LSG unit sells clothing and fanware via licensing deals with domestic and global sports leagues, lifestyle brands, colleges and universities. In fact, LSG’s revenues in 2015 were driven by demand for products related to Major League Baseball and the National Basketball Association.
LSG, which includes the Majestic brand, contributed to nearly half of Imagewear’s revenues last year, which came in at roughly $1.1 billion. However, V.F. Corp. posted dismal results for fourth-quarter 2015, wherein both top and bottom lines declined year over year and lagged estimates.
Results of this Zacks Rank #4 (Sell) company were battered by a soft consumer environment, lingering currency headwinds and unseasonably warm weather. In fact, sources revealed that sluggish consumer demand also triggered management to reassess its business, which would likely result in portfolio realignment – by means of acquisitions or divestitures.
The company has made similar moves in the past as well. Evidently, V.F. Corp. acquired Timberland in 2011, while it sold its menswear brand – John Varvatos Enterprises Inc. in 2012. The company’s focus on strategic acquisitions and expansion of global operations highlights its growth prospects.
Coming back to Imagewear, the segment also includes an Image unit which manufactures workwear for industrial, government and service sectors. However, this unit falls outside the purview of management’s aforementioned decision of exploring strategic alternatives.
Management further stated that this decision forms part of the company’s regular practice of checking its composition and ensuring that its portfolio is well aligned with its strategic plans. This in turn positions the company well for boosting growth and augmenting shareholder value. Hence, LSG’s review is likely to take Imagewear and V.F. Corp. forward, and enable it to unlock future potential.
Stocks to Consider
Some better-ranked stocks in the same industry include Delta Apparel Inc. DLA, with a Zacks Rank #1 (Strong Buy), Coach, Inc. COH and Michael Kors Holdings Limited KORS, both carrying a Zacks Rank #2 (Buy).
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