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VF on Acquisitions Hunt, and Tommy Could Be in Its Sights

As it posted first-quarter results, VF Corp. said it expects acquisitions to supply most of its top-line annual growth of 6 percent in coming years.

Robert Drbul, analyst for Lehman Brothers, wrote in a research note on Monday, "Despite the challenging top-line growth environment, VF Corp.’s portfolio of mature and recognized brands generates strong cash flow and its sound balance sheet provides a solid platform for growth. Cash flow from operations in 2002 totaled $645.6 million."

He cautioned, however, that, "while we believe VF’s jeanswear business remains healthy, it will face two significant challenges in 2003." Levi’s entrance into Wal-Mart and more than 300 Kmart store closings "are driving VF’s expected 9 percent jeanswear sales decline in the mass channel for 2003."

McDonald told the annual meeting that the continuation of momentum for its Lee jeans brand, with new fashion styles and a new Lee concept store in London, is a high priority for the firm. Lee Dungarees continues to be a fast-growing men’s brand. The company this year will launch a new missy program and logo under the "lee" jeans brand, which includes a new contour jean, as well as a continued rollout of its new juniors brand called "Wish," which was launched last year.

The company is also launching a new intimates brand, Curvation, at Wal-Mart this year. It also plans to freshen the look of its Vassarette assortment, McDonald said.

A big growth driver in the outdoor business was the cold and wet weather in the quarter, which contributed to strong sales of fleece products. VF plans to re-launch the Riders line for men, featuring a new look and logo, at Kmart sometime toward the second half of the year. In addition, Blu Jeans — a new men’s, women’s and kids’ brand for Target — is scheduled to start shipping in June. The launch could pave the way for other categories at Target, McDonald said, although he noted that the option was really up to Target.

McDonald was particularly pleased with the increased presence overseas of Wrangler, which is now in Russia and China.

VF currently operates seven full-price stores under the nameplate The North Face, and will open its first European store in London this year. It expects distribution at European retail accounts to reach 2,800 doors in 2003, growing to 5,000 doors in 2008.
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