To say that VF Corp. (VFC -3.85%) has been falling out of favor with Wall Street in recent years would be a tremendous understatement. The business, which is home to well-known fashion brands like Vans, The North Face, Timberland, and Dickies, underwent a major change three years back, spinning off its denim brands into a different company. Now, investors must consider what to do with the beaten-down stock. 

As of April 14, VF shares are down 78% from their peak in January 2020. And they are down 60% in the past 12 months. Does this mean it's time to buy? Let's take a closer look at this once-popular apparel stock. 

Reasons to be bullish 

Since spinning off the denim portfolio into Kontoor Brands (NYSE: KTB) in May 2019, VF's stock has fallen 76%. Kontoor, on the other hand, is up 17% over the same time frame. As a result of this pronounced underperformance, VF shares are trading hands at a price-to-earnings multiple of 21. This doesn't scream cheap at first glance, but it is below the average three-, five-, and 10-year average multiples. Add this to the current dividend yield of 8.1%, and it might be enough to entice some investors to own shares. 

Additionally, investors might be excited to hear that Goldman Sachs analyst Brooke Roach recently upgraded the stock to a buy with a price target of $27, which represents 21% upside from the current share price. Thanks to a post-COVID recovery in China, strong upcoming product launches at Vans, and better cost control, she thinks there are positive catalysts on the horizon. 

Reasons to be bearish 

But even with a cheap valuation and an upgrade from a Wall Street analyst, there are still some compelling reasons that investors should avoid VF Corp.'s stock right now. First, let's consider the balance sheet. As of Dec. 31, the business carried a whopping $5.5 billion of long-term debt, compared to $571 million of cash and cash equivalents.

And interest expense in the last quarter was 59% higher than in the year-ago period. It might not be a surprise that management decided to reduce the dividend payout amid the ongoing challenges. This was done with the sole objective of strengthening the company's financial position. 

There's no other topic that attracts more investor attention these days than the uncertain macroeconomic environment. Inflation that is still stubbornly high, rising interest rates, and the possibility of a recession are spooking consumers, executives, and investors. To be fair, every business is somewhat affected by what's going on with the economy. 

For VF, it's directly impacting the top line. Revenue dropped more than 2.5% on a year-over-year basis in each of the last two quarters. The leadership team is watching "the macroeconomic environment impacting consumer sentiment in spending on discretionary goods, particularly in Europe and the U.S."

Inflationary pressures are clearly pinching consumer's wallets. What's more, inventory levels doubled from a year ago to nearly $2.6 billion. This led to greater promotional activity, resulting in smaller gross margins compared to the fiscal 2021 third quarter. This will likely continue to be a headwind in the near term as VF tries to reduce its merchandise balance. 

Investors should also be aware of the fact that this is a consumer discretionary stock. Its brands, while popular, are exposed to the whims of constantly changing consumer trends. This means that continuously introducing new products that can drive customer demand over the long term is table stakes for lasting success. VF prides itself on its longevity, having been around since 1899. 

However, it's hard to understate the immense amount of competition that the business faces these days. Consumers have what seems like an unlimited number of choices at their disposal for various clothing and footwear products. Vans, accounting for 26% of overall company sales last quarter, competes with strong brands like Nike, Adidas, and Puma, to name a few. And The North Face, VF's largest brand by revenue, competes with Patagonia, Columbia Sportswear, and Canada Goose. 

Taking everything into account, it's hard to find enough compelling reasons to want to own the stock. Until investors can be confident that sales can grow at a faster clip on a sustainable basis, and the company's financial situation improves, this is a business you probably don't want in your portfolio.