V.F. Corporation

Would we all be naked in a crisis?

No, I don't think so! Sure, during an economic downturn you have to tighten your belt a bit, but I think people would rather do without a new luxury car than without a new rain jacket or a new pair of shoes. And that's exactly the question you should always ask yourself before an investment. How will my company come through an economic crisis? Or more generally: will this company still be around in 20 years? Just pick a stock you feel good about, a stock that further diversifies your portfolio. You don't need "hot stocks" in your portfolio that only give you restless nights.

The fashion giant V.F. Corporation is exactly that kind of boring company. Almost everyone knows brands like The North Face, Timberland, JanSport or Vans - but very few know the parent company V.F. Corp. And yet the stock is doing great, and the company is doing great on the dividend front too.

The history and business model of the V.F. Corporation

In 1899, 8 men founded the Reading Glove and Mitten Manufacturing Company in Reading, Pennsylvania. 2 of the men were already executives at a hosiery manufacturer. Another was the banker and brewer John Barbey - all the others only wanted to take a stake in the company as investors. Together they invested around $11,000 and rented a 30 m² factory for $60/month. They made knit and silk gloves, but unfortunately business didn't go as planned. Barbey, who handled all the financial matters in the company, decided 12 years later, in 1911, to buy out all his colleagues. For this he used the profits his father Peter made with his Sunshine Beer. From then on he ran the company on his own. In 1912 Barbey's son John Edward joined the company as vice president, and together they turned the firm into an underwear manufacturer. In 1913 they changed the name to Schuykill Silk Mills (the Schuykill is a river in Pennsylvania). But they never warmed up to the company name, so they held a contest. The $25 prize went to the winning name Vanity Fair. From then on the company was called Vanity Fair Silk Mills Inc.

In 1951 the company then went public under the abbreviated name V.F. Corporation. Over the years, the apparel company wanted to broaden its base and expand into other areas of fashion. So in 1969 it bought into the jeans maker H.D. Lee Mercantile Company from Kansas City. With the purchase of the Blue Bell Holding Company, V.F. Corporation became the largest apparel company in the world in 1986. The acquisition brought along well-known brands like Wrangler, Rustler, as well as JanSport and Red Kap. In 2000 V.F. Corp. rescued the outdoor outfitter The North Face Inc., which was on the verge of bankruptcy. The same year, the acquisition of the backpack maker Eastpak followed. In 2004 the brand Vans, popular with skaters, was added, and in 2011 another outdoor brand, Timberland. The company also acquired the workwear manufacturer Williamson-Dickie Manufacturing Company in 2017. In 2018 the athletic shoe maker Altra Footwear followed. When it comes to acquisitions, there's simply no end in sight. However, management also doesn't shy away from selling off companies that are doing worse. Most recently, for example, it took its jeans business public under the name Kontoor Brands Inc.

What's next for the V.F. Corporation?

It's long since no secret that more and more people are exercising more often. Whether it's jogging, hiking or cycling - V.F. Corp. has the right apparel brands in its portfolio. Especially among the younger target group, outdoor activities are extremely popular right now. Of course you need a suitable outfit for that. Brands like The North Face, Timberland and Vans are very popular here and have therefore been able to grow much faster than other brands recently.

The fashion group currently generates just under 60% of its revenue in the USA. So there's still enormous growth potential here, especially in Asia. To position itself better in China, for example, it entered into a partnership with Amazon competitor Alibaba. With the help of various data, it wants to target its audience better and offer more suitable products. In the long run, this strategy will surely pay off.

And what's the dividend doing?

A dividend has been paid regularly since 1941, and since 1973, so for 46 years now, the dividend has even been raised year after year. The dividend growth rate over the last 10 years is a fabulous 14.7 percent. Not much longer until it can count itself among the coveted Dividend Kings. The dividend yield is currently around 2.1 percent. Together with the annual dividend increase, a decent sum quickly adds up here. The payout ratio, at 65%, is a bit on the high side, but the company still has enough money left over to pull off more acquisitions.

Conclusion:
In my eyes, the V.F. Corporation is one of those companies that gets through an economic crisis more easily. If one brand doesn't sell as well as planned, that's easily absorbed by the other brands and segments. Long-term-oriented dividend investors in particular should enjoy this company.