Cowen Continues to See Rising Product Costs for VF Corp.

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A Cowen analyst downgraded shares of VF Corporation (NYSE:VFC) to Market Perform from Outperform, lowering the firm’s price target on the stock to $50 from $52 per share.

The analyst said Vans is lagging, and the company’s capital structure needs more leverage.

“We see uncertainty related to management’s guidance and Vans re-acceleration that is implied by consensus estimates into FY24 as digital trends that we track for Vans remain tepid,” said the analyst. “Consensus assumption for margin expansion through FY24 seems lofty.”

He explained that the firm is increasing its focus on the company’s dividend sustainability, with the stock yield now 4.5%, which “provides valuation support.”

Speaking on inventory levels, which have been a concern for retailers this year, the analyst said VF “inventory levels increased +92% y/y, driven up in part by in-transit levels and VF’s decision to implement a supply chain financing program, taking inventory ownership sooner while increasing payment terms with suppliers. We continue to see rising product costs and disruption related to working capital across the entire sector, which renders sales and gross margin modeling challenging.”

VF Corp shares declined 5.3% Monday.

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