VF is also an apparel company, which sports brands such as North Face, Wrangler and Vans. Its aggressive growth strategy seems to be paying off, judging by its first-quarter results. Revenue was up 6.5% year-over-year, and per-share earnings were 12% higher. Other rumored takeover candidates for VF include Puma and Lands’ End Inc. (NASDAQ: LE), which was recently spun off from Sears Holdings Corp. (NASDAQ: SHLD)
Lululemon has faced increased competition from the likes of much larger Nike Inc. (NYSE: NKE) and faster growing Under Armour Inc. (NYSE: UA). When Lululemon posted its results for the most recent fiscal quarter, earnings per share (EPS) were flat relative to the year-ago period. Same-store sales for the quarter fell 2% year-over-year, and operating income as a percentage of net income slipped from 31.4% a year ago to 29.6%.
Lululemon next reports its results in June, and the analysts’ consensus EPS estimate has dropped in the past 60 days from $0.40 to $0.32, which is in line with the guidance previously offered by Lululemon.
ISI Group analysts suggest a takeover would benefit VF, which has strong capabilities in brand building and product innovation, as well as a robust supply chain, but it lacks a significant presence in the growing performance athletic apparel segment.
Lululemon shares were up more than 4% to $46.77 in early trading, before settling back to $45.96 later on. The stock has traded in a range of $42.28 to $82.50 in the past year. Analysts have a mean price target of $57.57.
VF shares hit a new 52-week high of $64.00 in morning trading.
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