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Takeaway: We’ve liked the name, but earnings revisions are starting to look tired. We’d start to lighten up here.

The negative reaction to an otherwise decent quarter for VFC shows how punitive the market is when quality of earnings is even mildly suspect in a group that is overextended like retail. Yes, VFC beat on the EPS line by $0.03, but it missed the top-line due largely to weakness in Europe a slowdown in The North Face, and continued weakness in US Jeanswear (due to JCP). The company’s SIGMA looks good, but notable is that EPS revisions are trending negatively for VFC.  

After a 5-year streak of upwards revisions of an average of 5-6% for FY2 on the print, VFC guided roughly in-line for the second quarter in a row. EPS have been the main factor where bears have gotten this stock wrong.  With increased spending to support growth, and continued challenges in key businesses, it’s tough to bank on real EPS upside aside from better FX rates. That’s not exactly a multiple enhancer.

The punchline is that we’re a little surprised to see this event take down the stock by 5%, but have a tough time justifying that a name like VFC – even with its track record – should trade at a 15x multiple when the earnings trajectory is getting increasingly cloudy. We’ve liked the name, but would start to lighten up here.

VFC: Revisions Looking Exhausted - VFC EPS revis