Let's not mince words here: VF Corporation (VFC 2.88%) has had a terrible 2022. The parent company of well-known footwear and apparel brands like Vans, the North Face, Timberland, Dickies, and others has performed poorly and trimmed guidance multiple times.

Revenue declined, inventory built up, and management said that it had to be more promotional due to deteriorating demand, which has led to lower margins.

Making matters worse, the company's CEO stepped down in December. The company characterized the move as a retirement, but many investors are reading between the lines and believe he was forced out due to the stock's poor performance.  

This all added up to drive the stock down more than 60% this year. I know, I know: This doesn't exactly sound like a stock that you want to go anywhere near based on this introduction. But as Warren Buffett says, you want to be greedy when others are fearful, and fearful when others are greedy.

Here's why it's starting to look like it's time to be greedy against a backdrop of fear with VF Corporation, and why this could reward risk-tolerant investors.

People wearing winter coats.

Image source: Getty Images.

An intriguing portfolio of brands 

Let's get the rest of the bad news out of the way: During the second quarter of fiscal 2023, revenue fell 4%, although it should be noted that on a constant-currency basis, sales were up 1%.

Gross margins were also down because the company was more promotional. Vans and Dickies struggled, with revenue for these brands falling 13% and 19%, respectively (or 8% and 15% on a constant-currency basis).

While things have been bad in 2022, there's still a lot to like here, and the company's individual brands have a lot of potential, with the North Face in particular looking resurgent.

Even as overall revenue fell, North Face's revenue grew by 8% (14% on a constant currency basis). During the first half of fiscal 2023, North Face's revenue was up 15% (21% on a constant-currency basis). Anecdotally, I feel like I'm seeing this brand everywhere this winter. 

While Vans sales have been down, they doubled from $2 billion to $4 billion between 2017 and 2019, so perhaps it was inevitable that things would eventually cool a bit. Vans is still popular with younger consumers, and it is working to revamp some of its product lines to rekindle interest.

Vans, the North Face, and Timberland account for about 80% of VF's sales, so with the North Face performing well and Timberland growing revenue by 3% during the most recent quarter, if Vans can get back on track, the company should be in good shape again. This should be achievable, as it wasn't long ago that Vans was a coveted brand.      

One additional catalyst could potentially emerge, and we've seen this movie before. Foot Locker (FL -2.27%) is another retailer in the fashion and apparel space that was struggling, but the appointment of a new CEO (Mary Dillon) reignited interest in the stock and set the company on a better long-term path. In the second half of 2022, Foot Locker shares gained about 32%, illustrating that investors still have plenty of appetite for a good turnaround story in this space.

We don't yet know who VF Corporation will hire as its new CEO or if it will be able to make a home-run hire like Foot Locker did. But at the very least, a company with a portfolio of high-profile brands like these should attract a high-caliber CEO.

If VF can make a splash with the right hire, the stock could potentially follow Foot Locker's recent trajectory.

Undemanding valuation 

Down 62% year to date and trading at 11 times forward earnings, a lot of the aforementioned challenges already seem to be priced into the stock. While the outlook for the year ahead is muted, VF Corporation believes that it can provide shareholder returns in the low teens (based on high-single-digit EPS growth, share repurchases, and its dividend) over the next few years. With the dividend yielding nearly 8%, this appears to be achievable.   

A soon-to-be Dividend King  

VF Corporation has increased its dividend annually for 49 years in a row, so if it raises its payout in 2023, it will become a Dividend King, a rare and coveted status. This track record of annual dividend growth shows the company's long-term commitment to rewarding its shareholders with capital returns. 

After the stock's year-to-date decline, the dividend yield is now nearly 8%. While rising interest rates mean that investors have choices other than dividend stocks, such as Treasury bonds, VF's yield remains compelling even in a higher-rate environment. 

The company has a relatively high dividend payout ratio of 75%, but it seems unlikely that it would cut its dividend payment less than a year away from becoming a Dividend King. 

While 2022 has been a year VF Corporation would like to move on from, for investors, this looks like a situation where it can pay to be greedy when others are fearful. There are still strong brands here, and the right CEO could do a lot with them. The company's inexpensive valuation and massive dividend yield give it a margin of safety and should help to boost investors' returns over time as they wait for a turnaround.

The hiring of a high-profile CEO could be a major catalyst for the share price. Based on these factors, VF Corporation stock looks like a buy at these levels.