We recently compiled a list of the 10 Footwear Apparel Stocks Affected By China Tariffs. In this article, we are going to take a look at where V.F. Corporation (NYSE:VFC) stands against the other footwear apparel stocks.
Donald Trump’s sweeping tariffs on China, Mexico, and Canada have caused a lot of footwear and apparel stocks to crash. Even though the President paused tariffs on Canadian and Mexican goods for a month, the 10% tariffs on China are still in place.
Fashion brands provide an interesting investment opportunity. Due to their loyal following, they have the ability to raise prices to take care of tariffs. In a similar way, these brands have become quite agile in diversifying their supply chain since the pandemic, so sourcing products from outside China is also a possibility for many. More than these brands, it is the retailers that will get hurt as their value proposition to their customers may get hurt when brands raise prices. However, these retail stocks are not a part of our discussion for now.
In order to come up with our list of 10 stocks affected by Trump’s tariffs on China, we only considered stocks with a market cap of at least $1 billion and a product sourcing mix exposure to China of at least 5%.
A model walking down the runway wearing a fashionable and performance-based apparel designed by the company.
V.F. Corporation (NYSE:VFC)
V.F. Corporation is a branded lifestyle footwear, accessories, and apparel designer, distributor, and marketer. The company operates in Active, Outdoor, and Work segments. It sells its products mainly to mass merchants, department stores, independently operated partnership stores, national chains, specialty stores, and direct-to-consumer platforms. The company sources 15% of its products from China.
VFC recently released its Q3 earnings report, beating analyst estimates. Financial results indicated non-GAAP EPS topped by $0.28 while revenue surpassed by $80 million. The company reported a solid YoY growth of 1.8% and showed a 56.3% gross margin expansion.
While margin expansion is a growth trend, it was partly associated with lower promotional expenses so the sustainability of this expansion is yet to be determined. The company’s cost reduction program is working as expected as SG&A (selling, general & administrative) expenses were reduced by 3% as compared to the previous year on an adjusted basis. For long-term investors, the key highlight was a 43% decline in net debt excluding operating leases. Given the strong Q3 performance and share price performance of 14% in January, now is the time for investors to consider an entry into the stock.
Overall VFC ranks 6th on our list of the footwear apparel stocks affected by China tariffs. While we acknowledge the potential of VFC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as VFC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
