CNBC’s Jim Cramer said Thursday that investors looking beyond the struggling artificial intelligence industry should consider apparel stocks. VF Corporation and Kontoor brand.
VF Corp is the parent company of Vans, The North Face, and Timberland. Kontoor was actually spun out of VF Corp in 2019 and is behind the Wrangler, Lee, and Helly Hansen brands.
The recommendation comes at an unlikely time for consumer stocks, as rising interest rates and oil prices threaten to squeeze household budgets. “Normally I would be hesitant to recommend apparel stocks at this point in the economic cycle, but VF Corp and Contour have already come down significantly from their highs and are at depressed valuations,” Cramer said. “I think it’s ingrained in the environment.”
Kramer also cited compelling new research that suggests changing fashion trends could breathe new life into both companies and create buying opportunities that investors may have overlooked. “These upgrades have changed my mind about VF Corp and Kontoor,” he added. “I think both stocks are buys here.”
VF Corporation YTD
Trust, Inc. and Piper Sandler both upgraded VF Corp.’s rating to buy. Coincidentally, both have set price targets of $20, suggesting an upside of about 17% by Thursday’s close.
Kramer was particularly encouraged Tuesday by Piper Sandler’s memo accompanying the company’s fall teen survey. Research into what young consumers prefer shows an increased interest in non-athletic shoes. This could be welcome news for Vans. Vans has seen sales decline for four consecutive fiscal years, with double-digit declines in each of the past three fiscal years.
Piper Sandler’s research shows that Vans is finally stabilizing, ranking as the seventh most popular shoe brand among male teens after years of languishing in the rankings, and rising to No. 9 among male teens in higher income brackets. The struggling skateboard sneaker brand is the biggest obstacle to VF Corp.’s turnaround under CEO Bracken Darrell, who took over in July 2023. While Vans’ sales have fallen by nearly 50% since fiscal 2022, The North Face and Timberland’s performance has improved significantly.
As for other brands, Timberland entered the top 10 footwear brands among high-income teens for the first time in the study’s history, while The North Face returned to the group’s top 10 sports clothing brands. “When a survey of teenagers tells you to buy VF Corporation, you have to say (buy, buy, buy),” the “Mad Money” host said.
Trust similarly expects Vans to benefit as consumers move away from athletic shoes and towards more fashion-forward styles. VF Corp.’s 2027 earnings forecast is trading at about 16 times earnings, and Cramer said, “If Vans is finally starting to improve, it’s definitely a winner.”
Kontoor Brand YTD
As for Control, Jefferies upgraded the stock from hold to buy and raised its price target to $89, implying a 22% upside from Thursday’s closing price.
Analysts argued that denim’s recent resurgence in popularity could be a permanent change. They identified Kontoor as one of the two biggest potential beneficiaries, and Wrangler is well-positioned to capitalize on this trend.
Kontoor’s planned $400 million accelerated share repurchase program is another reason to like the stock, Jefferies said. The share buyback is equivalent to approximately 10% of the company’s market capitalization.
Kramer also highlighted Control’s acquisition of Helly Hansen last year as an underappreciated growth opportunity. Once Kontoor’s planned sale of denim brand Lee to Authentic Brands is completed, outdoor apparel brands will become a large part of Kontoor’s business. The deal, worth up to $1 billion, was announced in May and is expected to close later this year.
With Kontoor trading at roughly 14 times expected 2026 EPS, the stock offers an attractive way to capitalize on denim’s resurgence without paying a premium valuation, Cramer said. “It’s a wise investment,” he said.
