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This Retailer Has Hit Rock Bottom.



Key Points
Shares of V.F. Corporation have been sliding for three years. 
Last month’s earnings report signaled the launch of an ambitious turnaround plan. 
In addition, JP Morgan just upgraded the stock, and shares should rally at the end of the year.
5 stocks we like better than V.F.
There’s no getting around it: V.F Corporation NYSE: VFC has had a horrible three years. Since Thanksgiving 2020, retailer shares have dropped 80%, which has put them back trading at 2006 levels. Indeed, one is left wondering what kind of investor has stuck around with them for that long. Much of the damage has come from slowing sales in the company’s flagship Vans brand, revenue from which was down 21% year on year in last month’s earnings report. 
This was one of the drivers behind management’s decision to drop forward cash flow guidance by more than 30%, a catastrophic adjustment that made a bad stock even worse. V.F. Corporation shares plummeted 25% in the aftermath of the report and sank to fresh lows. 
Poor earnings
In the four weeks since that bloodletting, though, there has been a recovery bounce, albeit a small one in the greater context, and shares are back to their pre-earnings level. Perhaps the new initiatives to cut costs by $300 million as part of a transformation plan, Reinvent, are winning them new fans. Considering that V.F. Corporation’s dividend was cut 70% as part of this, it’s hard to imagine them retaining any old ones. 
But for those of us on the sidelines, it’s actually not a bad time to at least be watching the latest chapter of the V.F. Corporation story unfold. The week before last, the team over at JP Morgan took the bold step of upgrading their rating on V.F. Corporation shares from Underweight to Neutral. It was a long way from a full upgrade to a bullish Overweight rating, but it’s a step in the right direction and a pivotal one at that. 
Turnaround potential
Analyst Matthew Boss is a fan of the cost-cutting initiative and, if executed properly over the coming quarters, sees V.F. Corporation returning to a “profit inflection” point within the next two years. All that being said, headwinds do remain. It remains a challenging macro environment for companies like V.F. Corporation, even those performing well, with rising wages and supply chain costs a constant headache.In addition, any company, like V.F. Corporation, looking to leverage more from their online channel is facing higher costs of digital customer acquisition. So it’s getting squeezed no matter where it looks. 
Boss and his team also took the step of increasing their December price target on the stock by 25%, moving it to $19. Were shares to hit this in the final weeks of the year, it would be viewed as a resounding success, given how bad October’s report was. It would also mean the stock was back trading at the same level it spent this past summer, giving it a strong technical base from which to launch a fresh leg of the recovery rally in the new year. 
Getting involved
So, for those of us on the sidelines watching with interest, and maybe even a little more than that, what’s the opportunity here? Well, depending on your appetite for risk, there is an interesting entry opportunity opening up, be it for the long term or the short term.
The former would require you to view this as a multi-year bottom and the very beginning of what will be a long recovery. Supporting this, you have the most ambitious turnaround plan the company has ever launched, along with some undeniably bright spots from the recent earnings report. The company’s North Face brand, for example, showed year-on-year growth of 19%. 
For the investor with a short-term view, long-term optimism isn’t required, and the opportunity is more about a dead-cat bounce. There’s a clear low at $13, set at the start of the month, from where shares have been setting higher highs and lower highs in the three weeks since.
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