Unlock: VF Corp (VFC) Bearish Q3 Earnings Preview

It pays to do fundamental research. This bearish Q3 earnings preview for VFC was presented to clients last Friday on October 21. Stock is falling 3% today after posting weak quarter and cutting guidance. To learn more about our approach and how you can become a successful trader, sign up for 2 week trial and test drive live chat room with some of the best traders: SUBSCRIBE

VF Corp (VFC) – Ugly chart threatening to breakdown to new 52-week low with earnings scheduled next week on October 24 before market opens. One trader buying the following bearish risk reversal:

– 1,000 November 55 calls sold to open for $1.20 credit
– 1,000 November 50 puts bought to open for $0.60 offer

I have written extensively previously about the deterioration in fundamentals and back in early 2016 made a YouTube video as well. The big crash in Skechers (SKX) today with stock down -17% post earnings is providing negative read through for at least one of business segments of VFC. Three things you need to keep in mind:

1) North Face (19% of Sales) – Hasn’t reinvented itself with any new launches since last major launch of Thermoball in 2013. Combine slowing consumer interest with excess inventory in retail channel and picture gets ugly. See first chart below.

2) Vans Footwear (18% of Sales) – There is a trend in play with shift taking place from canvas footwear towards retro sneakers and those who cannot reinvent themselves are going to get hurt. Skechers (SKX) sell off today is great example. Tough competition in North America with little differentiation in canvas footwear. Shoe Carnival (SCVL) and Journey’s back in August both cited slowdown in canvas footwear during back-to-school season.

3) Timberland (15% of Sales) – Negatively impacted by falling mall and departmental store foot traffic and elevated promotional activity. In Q2 management stated high inventory imbalance in North America. Inventory has come down but buying interest (demand) has come down even more, resulting in still net increase in inventory. Additionally, Google search trends for Timberland brand is crashing worldwide. See second and third chart below.