VF corporation case analysis
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VF Corporation aims to grow by building leading lifestyle brands and fostering a culture of innovation and diversity. They face competition from major brands and challenges with product life cycles, but have strengths in their organizational structure and market position. The company seeks to expand its presence, particularly in Eastern Europe, and improve operational efficiency while maintaining strong financial metrics.
VF corporation case analysis
- 3. VFC Operates
- 4. ``WE WILL GROW BY BUILDING LEADING LIFESTYLE BRANDS THAT EXCITE CONSUMERS AROUND THE WORLD” Current Vision
- 5. MISSION
- 6. Mission Ours is a perpetually driven culture, focused on constant innovation (4). Using deep research and insights, we combine the art and science of apparel to create products that excite consumers and brands that inspire loyalty (5,7). We responsibly manage the industry's most efficient and complex supply chain, which spans multiple geographies (3), product categories and distribution channels(2). Our goal is to continuously exceed the expectations of our consumers, customers (1), shareholders and business. partners (6) We help our retail partners win with consistently solid execution and outstanding service. And we continually find ways to improve our performance and generate bottom line results. Our people are the source of our success (9). VF associates share a deep commitment to diversity - in people and ideas. We conduct business with the highest levels of honesty and integrity (8) and we foster a positive working environment based on creativity, collaboration, and congeniality. These are the things that make us great. These are the things that make us VF.
- 7. VISION & MISSION “To create a truly global brand that provides growth opportunities for the company and its employees, whilst achieving its goal of becoming the number one value fashion retailer around the world.”
- 8. Opportunities Eastern Europe is a fast growing market with Ukraine leading the way. Baby boomers are the largest per capita consumers of apparel. 71 million teens in the US are maturing into young adults. Consumers 20- 34 account for 24% of the appeal spending in the US. Social media enables retailers to listen to customers in real time. US consumers spent $192 billion in 2010 on apparel. External Audit
- 9. External Audit Threats 1. Gap, Timberland, Nike, Adidas, and Reebok are all strong competitors. 2. Product life cycles are short and fashion trends can change quickly. 3. Timely delivery and low cost transportation and oil from supply chain being over seas. 4. US is still suffering from high unemployment around 9% and low home prices. 5. Cotton prices are up over 100% from 2009.
- 10. EFE (External Factors Evaluation) Matrix
- 11. EFE (External Factors Evaluation) Matrix
- 12. Internal Audit Strengths Diversity of products (more than 25 brands). Largest branded apparel company in the world. Excellent organizational structure with 5 distinct SBUs. International revenues account for 30% of revenues. Opened 15 new stores in first quarter 2011 bringing total number of owned retail stores t o788. Weathered the 2008-2009 recession better than competitors. Stock price increased from $40 to $140 or 140% from 2009 to year end 2011.
- 13. Internal Audit Weaknesses Current Ratio of 1.5 compared to 3.0 for the industry suggests VF is more highly leveraged than competition. Receivables turnover is only 6.7 compared to 38 for the industry. Revenues have not increased in the last 3 years. Property, Plant, & Equipment remained the same. Approximately $2.5 billion or 40% of assets come from goodwill or intangibles. Sportswear, Contemporary Brands and Other segments are not operating efficiently. Currently paying over 18% of revenue for labor.
- 14. IFE Matrix (Internal Factors Evaluation)
- 15. IFE Matrix (Internal Factors Evaluation)
- 16. Financial Analysis Inventory method: 75% FIFO , 25% LIFO Common stock: $411,830,000 ,Largest course of cash from investing activities Capital expenditures $111,640,000
- 17. Financial Analysis • Liquidity and Efficiency Current Ratio • 2009: 2.4 • 2010: 2.5 • Since 2005, current ratio fluctuated from 2.1 to 2.6 Their current ratio most likely fluctuated in the past
- 18. Inventory Turnover 2009: 3.81 2010: 4.05 They needed to cut their supply/inventories in order to keep their costs competitive Accounts Receivable: Turnover Ratio : 2009: 8.77 2010: 9.84 Accounts receivable stayed roughly the same, while net Financial Analysis
- 19. Solvency Debt to equity ratio 2009: .697 2010: .672 Debt to equity ratio did not fluctuate as much as in previous years No sales or purchases of companies VF Corporation keeps their debts very low easier to pay off debt strong solvency Financial Analysis
- 20. Profitability Profit Margin Ratio 2009: .064 2010: .074 Gross Margin Ratio 2009: .437 2010: .461 Return on Total Assets Ratio 2009: .071 2010: .089 Financial Analysis
- 21. Financial Analysis Would we invest in VF Corporation?
- 22. Yes Dividends Double dividend payments every 8 years EPS: Annual Dividends 11.9% Greater than average EPS Attractively valued14 times earnings Payout ratio stayed under 50% Financial Analysis
- 23. QSPM (Quantitative Strategic Planning Matrix)
- 24. QSPM (Quantitative Strategic Planning Matrix)
- 25. QSPM (Quantitative Strategic Planning Matrix)
- 26. QSPM (Quantitative Strategic Planning Matrix)
- 27. Competitors
- 28. • Build 100 new stores in Eastern Europe (S1, S2, S5, S6, O1, O9). • Develop line of products attractive to Baby boomers (S1, S2, O2). • Increase from 34% to 50% production of own products (S4, O5). SO Strategies Strategy
- 29. Strategy • Build 100 new stores in Eastern Europe (W4, O1, O9). • Introduce and advertising campaign to ensure customers associate all of VF Corp’s brands with the VF Corp. (W6, O6, O7). • Acquire Babe Stores (W4, O3, O4, O7). WO Strategies
- 31. Strategy • Expand accounting staff to aid in collections (W2, T1). • Liquidate Sportswear, Contemporary Brands, and Other segments (W7, T1). WT Strategies
- 32. Recommendations Build 100 new stores in Eastern Europe at $1.5M each for $150M. Expand on customer basis and revenue opportunities International sales and opportunities Produce a form of loyalty program for customer specially with their high price product