V.F. Corp. (NYSE:VFC) , on Friday, completed the previously announced sale of its underperforming Contemporary Brands business to Israel’s Delta Galil Industries Ltd. As agreed, the company received $120 million for the sale. Brands sold under the transaction included the denim brand 7 For All Mankind and lifestyle apparel brands, such as Splendid and Ella Moss.
The company’s intent behind offloading this business is to continue with its active portfolio management strategy, wherein it constantly reviews its brands' portfolio and retains the best performing ones while discarding the ones that are troubled. The company recently shifted its focus to the composition of its brands' portfolio with the aim of maximizing its growth and shareholders' returns.
While the brands, mentioned above, hold significant potential for growth, the company’s Contemporary Brands segment has lately been facing challenges due to declining demand for casual and basic apparel. The segment reported a 14% drop in revenue to $344 million in 2015 and represented only 2.8% of the company’s total revenue.
While the transaction means departure from underperforming businesses for V.F. Corp., it represents a strategic move for Delta Galil to expand its branded business and global portfolio. This manufacturer and marketer of branded and private label apparel products for men, women and children, sees this acquisition as a way to diversify its merchandise offering and distribution channel, while strengthening its structure. The acquisition is expected to add over $300 million to the company's annual sales and be accretive to earnings in 2017.
In an attempt to enhance its portfolio structure, in March, V.F. Corp. revealed plans to seek strategic options for its Licensed Sports Group (“LSG”) unit, which forms part of the company’s Imagewear segment. The LSG unit, which includes the Majestic brand, mainly generates revenues through demand for products related to Major League Baseball and the National Basketball Association.
However, this transaction excludes the segment’s Image unit, which manufactures workwear for industrial, government and service sectors.
V.F. Corp.’s practice of regularly checking its composition and ensuring that its portfolio is well aligned with its strategic plans positions it well for boosting growth and increasing shareholders' value. The company currently carries a Zacks Rank #3 (Hold).
V.F. Corp. closed a notch lower at $63.99 on Aug 26, 2016.
Stocks to Consider
Some better-ranked stocks in the same industry are PVH Corp. (NYSE:PVH) , Ralph Lauren Corp. (NYSE:RL) and Guess’ Inc. (NYSE:GES) , each carrying a Zacks Rank #2 (Buy).
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