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V.F. Corp (VFC) Surges 13% After Agreeing to Sell Supreme Brand
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V.F. Corporation (VFC - Free Report) , a leading figure in the apparel sector, recently unveiled a deal to sell Supreme, the acclaimed streetwear brand, to EssilorLuxottica, owner of renowned eyewear Ray-Ban. The news about this sale transaction, valued at $1.5 billion, propelled VFC's shares to surge 13.6% on Jul 17.
The company’s decision to sell Supreme to EssilorLuxottica not only underscores V.F. Corp's strategic focus but also reflects the growing value and appeal of streetwear brands in the market. The substantial rally in the company’s shares highlights investors’ optimism about this strategic transaction.
Inside the Headlines
Supreme, the trendy streetwear brand loved by celebrities and cool kids alike, has grown from a small skate shop in New York City into a global fashion icon since 1994. The brand's collaborations with luxury designers like Louis Vuitton and sports giant Nike have created a sense of exclusivity that drives intense consumer demand.
In 2020, V.F. Corp acquired Supreme with expectations that the brand's trendy image would bolster its portfolio and drive growth. Eventually, the company’s decision to sell Supreme indicates that the Supreme acquisition, which was once considered transformative, did not meet expectations. By 2023, V.F. Corp had written down about two-thirds of Supreme's value, indicating severe brand erosion over a short period.
The acquisition of Supreme was intended to inject a sense of trendiness and appeal to younger consumers into VF Corp's portfolio. However, this acquisition did not materialize. Instead of boosting the company's overall performance, the acquisition became a distraction.
Management's focus shifted towards attempting to revive Supreme, which further diverted attention away from V.F. Corp's other major brands like The North Face and Vans, which were already facing challenges.
Despite Supreme's impressive growth in China and South Korea, VFC’s management views this acquisition to be logical as Supreme’s distinct business model and V.F. Corp’s integrated approach resulted in limited synergies between the two entities.
However, the company’s decision to sell Supreme fits into its broader strategy of refining its portfolio to enhance alignment and operational efficiency across its business model.
On the other hand, management of Ray-Ban and Oakley parent EssilorLuxottica views this acquisition as a positive move. They envision this move as an expansion beyond the traditional eyewear offerings. Also, the ongoing journey of innovation and development and establishing direct connections with new demographics, languages and avenues of creativity are some of the driving factors for EssilorLuxottica.
Wrapping Up
Selling Supreme allows V.F. Corp to cut its losses and refocus on its core brands, aiming to stabilize and potentially revitalize its business. Investors have received this move positively, as evidenced by the surge in V.F. Corp shares following the announcement.
This Zacks Rank #5 (Strong Sell) company’s shares have rose 25.8% in the past three months against the industry’s decline of 4.6%.
Image Source: Zacks Investment Research
Three Solid Picks
We have highlighted three better-ranked stocks in the broader sector, namely, Hanesbrands (HBI - Free Report) , G-III Apparel Group (GIII - Free Report) and Guess (GES - Free Report) .
Hanesbrands engages in designing, manufacturing, sourcing and selling of apparel essentials for men, women and children in the United States and internationally. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Hanesbrands’ current financial-year earnings suggests a 666.7% surge from the year-earlier levels. It has a trailing four-quarter earnings surprise of 10.2%, on average.
G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. GIII carries a Zacks Rank #1 at present.GIII Apparel has a trailing four-quarter earnings surprise of 571.8%, on average.
The Zacks Consensus Estimate for GIII’s fiscal 2024 revenues indicates an increase of 3.3% from the year-ago period’s reported level.
Guess designs, markets, distributes and licenses casual apparel and accessories for men, women and children, per the American lifestyle and European fashion sensibilities. GES carries a Zacks Rank #2 (Buy) at present.
The Zacks Consensus Estimate for Guess’s current financial-year sales suggests growth of 11.7% from the year-ago reported figures. GES has a trailing four-quarter earnings surprise of 31%, on average.
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V.F. Corp (VFC) Surges 13% After Agreeing to Sell Supreme Brand
V.F. Corporation (VFC - Free Report) , a leading figure in the apparel sector, recently unveiled a deal to sell Supreme, the acclaimed streetwear brand, to EssilorLuxottica, owner of renowned eyewear Ray-Ban. The news about this sale transaction, valued at $1.5 billion, propelled VFC's shares to surge 13.6% on Jul 17.
The company’s decision to sell Supreme to EssilorLuxottica not only underscores V.F. Corp's strategic focus but also reflects the growing value and appeal of streetwear brands in the market. The substantial rally in the company’s shares highlights investors’ optimism about this strategic transaction.
Inside the Headlines
Supreme, the trendy streetwear brand loved by celebrities and cool kids alike, has grown from a small skate shop in New York City into a global fashion icon since 1994. The brand's collaborations with luxury designers like Louis Vuitton and sports giant Nike have created a sense of exclusivity that drives intense consumer demand.
In 2020, V.F. Corp acquired Supreme with expectations that the brand's trendy image would bolster its portfolio and drive growth. Eventually, the company’s decision to sell Supreme indicates that the Supreme acquisition, which was once considered transformative, did not meet expectations. By 2023, V.F. Corp had written down about two-thirds of Supreme's value, indicating severe brand erosion over a short period.
The acquisition of Supreme was intended to inject a sense of trendiness and appeal to younger consumers into VF Corp's portfolio. However, this acquisition did not materialize. Instead of boosting the company's overall performance, the acquisition became a distraction.
Management's focus shifted towards attempting to revive Supreme, which further diverted attention away from V.F. Corp's other major brands like The North Face and Vans, which were already facing challenges.
Despite Supreme's impressive growth in China and South Korea, VFC’s management views this acquisition to be logical as Supreme’s distinct business model and V.F. Corp’s integrated approach resulted in limited synergies between the two entities.
However, the company’s decision to sell Supreme fits into its broader strategy of refining its portfolio to enhance alignment and operational efficiency across its business model.
On the other hand, management of Ray-Ban and Oakley parent EssilorLuxottica views this acquisition as a positive move. They envision this move as an expansion beyond the traditional eyewear offerings. Also, the ongoing journey of innovation and development and establishing direct connections with new demographics, languages and avenues of creativity are some of the driving factors for EssilorLuxottica.
Wrapping Up
Selling Supreme allows V.F. Corp to cut its losses and refocus on its core brands, aiming to stabilize and potentially revitalize its business. Investors have received this move positively, as evidenced by the surge in V.F. Corp shares following the announcement.
This Zacks Rank #5 (Strong Sell) company’s shares have rose 25.8% in the past three months against the industry’s decline of 4.6%.
Image Source: Zacks Investment Research
Three Solid Picks
We have highlighted three better-ranked stocks in the broader sector, namely, Hanesbrands (HBI - Free Report) , G-III Apparel Group (GIII - Free Report) and Guess (GES - Free Report) .
Hanesbrands engages in designing, manufacturing, sourcing and selling of apparel essentials for men, women and children in the United States and internationally. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Hanesbrands’ current financial-year earnings suggests a 666.7% surge from the year-earlier levels. It has a trailing four-quarter earnings surprise of 10.2%, on average.
G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. GIII carries a Zacks Rank #1 at present.GIII Apparel has a trailing four-quarter earnings surprise of 571.8%, on average.
The Zacks Consensus Estimate for GIII’s fiscal 2024 revenues indicates an increase of 3.3% from the year-ago period’s reported level.
Guess designs, markets, distributes and licenses casual apparel and accessories for men, women and children, per the American lifestyle and European fashion sensibilities. GES carries a Zacks Rank #2 (Buy) at present.
The Zacks Consensus Estimate for Guess’s current financial-year sales suggests growth of 11.7% from the year-ago reported figures. GES has a trailing four-quarter earnings surprise of 31%, on average.