What happened
Week to date, shares of VF Corp. (VFC 0.16%) were down 14% as of 12:30 p.m. ET on Friday, according to data provided by S&P Global Market Intelligence.
Earlier this week, the company announced that CEO Steve Rendle was retiring and appointed director of the board Benno Dorer as interim president and CEO. The company also announced a downward revision to its outlook amid a weak consumer spending environment.
So what
The uncertainty around the change in leadership compounds the uncertainty for the company, which is already struggling to keep revenue growth up.
Credit Suisse (CS) analyst Michael Binetti downgraded the stock to neutral, citing near-term risks to the company's financials with consumers reducing spending. Many retailers are being forced to offer discounts to drive sales this quarter, which is expected to put further pressure on revenue and profits in the near term.
However, Binetti also argues that the vacant CEO position will attract top talent. VF owns some of the best brands in apparel, including The North Face, Vans, and Timberland. The company also acquired the popular streetwear brand Supreme in 2020 to round out a strong portfolio of brands to drive long-term growth.
Now what
It's likely to get worse before things get better. The company reported a revenue increase of 2% year over year in constant currency last quarter. But management sees the weak economy weighing on revenue during the holiday season.
It now expects revenue growth in the second half of the fiscal year to be "modestly lower" than previously forecast, but still up between 3% to 4% year over year in constant dollars. The company remains committed to reaching its long-term growth goals, so investors should still feel confident about the stock's return prospects at this low valuation level.
