VF Corp (VFC)

b15184 (99.35) Submitted: 11/12/07 9:02 PM : Start Price: $78.37 VFC Score: 2.96

I am returning to this stock with an "Underperform" rating. The company is essentially well-managed, and they do a nice job of using their (lofty) stock price to identify and purchase smaller companies to add to their portfolio of apparel, outdoor gear, and footwear brands.





The problem I see for the company is the following: they are going to be at "ground zero" for the devaluation of the US$. Contrary to what many believe, VF Corp does NOT manufacture any of their products on their own (in the U.S.). It is almost ALL manufactured overseas and shipped into the U.S. for finishing (VF Imagewear does embroidery, logos, college designs in the U.S., but the basic apparel products all come from overseas).





So, if you believe the $US will continue to devalue (and I strongly believe it will, due to the Fed's continuous, irresponsible monetary easing), then VFC is going to be caught with rising manufacturing costs (which they are going to have to try to pass along to the consumer). There will DEFINITELY be margin compression as raw material costs go up, and they try to insulate the retailer / consumer from price increases as long as they can, BUT, they will also have to try to hit the $6.02/share earnings estimate (consensus) for FY2008.





I don't think they're going to make that. If they do, bully for them. But they're facing strong headwinds right now with the $US. Also, anyone who follows Dryships or any of the drybulk carriers knows that inbound shipping rates over the next year are forecast to go up dramatically. Another headwind.





Good luck to everyone with your investment here, whether it is a real one or just a CAPS pick.

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