Dive Brief:
- S&P Global Ratings downgraded VF Corp., citing a less favorable view of the company’s competitive position due to revenue declines and weaker credit ratios, according to an S&P statement last week.
- VF is now rated “BB,” down from its previous score of “BBB-,” which moves the apparel conglomerate from “investment grade,” to “speculative grade.” Companies in the BB category at S&P are defined as being less vulnerable in the near-term, although they still face “major ongoing uncertainties to adverse business, financial and economic conditions.”
- The analysts said they expect the rest of VF’s 2025 fiscal year, as well as fiscal 2026, to be a transitional period, while the company works to execute its stabilization strategy.
Dive Insight:
S&P analysts noted that its rating of VF could be raised if the company can stabilize its largest brands, including Vans, and return to revenue growth. They also called for VF to stabilize its profitability metrics and continue to prioritize debt repayment over shareholder returns.
The statement also noted that S&P would further lower its rating if Vans or another one of VF’s major brands fell out of favor “due to fashion missteps or changing consumer tastes.” Additional risks, per S&P, include an economic environment that reduces consumer demand for apparel and footwear, a potential supply chain disruption, or if the company pursued a large acquisition.
In the current rating, S&P said that while the recent sale of Supreme helped VF address some of its debt burden, closing its portfolio review raised questions about VF’s commitment to investment-grade ratings.
“Management’s lack of incremental asset sales demonstrates financial policies that are not as supportive of investment-grade ratings,” S&P said in the statement. “...At this time, we believe VF remains committed to a conservative financial policy and debt reduction, but it will take several years.”
S&P additionally said VF’s strategy to turnaround the Vans brand would take several years.
While inventory reduction at Vans was necessary, it hurt operating results, S&P said. VF’s efforts for Vans include naming a new president along with boosting its brand building efforts. Despite this, S&P said that weak wholesale demand in North America and an increasing competitive landscape means these actions will be slow.
S&P downgraded VF following the company’s Q2 of fiscal 2025 results last month, in which the company reported a 6% year-over-year revenue decline, with losses at each of its key brands, which in addition to Vans includes Timberland, The North Face and Dickies.
Following the Q2 results, VF held an Investor Day and announced its plans at a high-level, which included cost reduction, reinvestment into brands and reducing debt. Specific strategies for different brands would be announced at a future investor day, per S&P.
A VF spokesperson didn’t immediately respond to Fashion Dive’s request for comment on the S&P ranking.
