S&P: VF Corp.'s New Euro-Denominated Unsecured Notes Rated 'A'
VF Corp. is the largest U. S. apparel company, with over $12 billion in revenue. The company has grown through a combination of organic growth and acquisitions, and generates approximately 30% of revenue through its e-commerce and retail stores (from near 22% in 2013), which offsets some of the risk of ongoing wholesale-channel disruption. Our rating also reflects our view that the company has good market positions across its four coalitions (outdoor and actions sports, jeanswear, imagewear, and sportswear). It also reflects VF Corp.'s strong and well-diversified brand portfolio, which includes brands such as The North Face, Vans, Timberland, Wrangler, Lee, Nautica, Majestic, and Kipling. VF Corp. has good distribution across various channels and price points. We expect the company to continue to optimize its brand portfolio and to maintain its industry leadership based on the strength and success of its brands and strong global operating platform. In addition, the company continues to generate more than one-third of its revenue from international markets, which lessens its reliance on the domestic market. We also believe the company will continue to invest in its retail store and e-commerce operations.
Our assessment also reflects our view that VF Corp.'s credit metrics will remain near current levels in 2016 and 2017 (debt to EBITDA of a low 1x), given its consistently good cash flow generation and profitability. We expect the company will remain shareholder friendly and continue its dividends and share repurchases near recent levels. Nevertheless, it can fund shareholder distributions easily through internal cash flow, without materially impacting its credit metrics. (See "Summary: VF Corp.," published Aug. 3, 2016, on RatingsDirect for further details.)