CNBC’s Jim Cramer said Thursday that investors looking beyond the struggling artificial intelligence trade should consider apparel stocks. VF Corp and Kontoor brand.
VF Corp is the parent company of Vans, The North Face and Timberland. Kontoor, which actually spun out of VF Corp in 2019, is behind the Wrangler, Lee, and Helly Hansen brands.
The recommendation comes at an unlikely time for consumer stocks, with rising interest rates and oil prices threatening to squeeze household budgets. “Normally, I hesitate to recommend apparel stocks at this point in the business cycle, but VF Corp and Kontoor have come down dramatically from their highs, and are trading at depressed valuations,” Cramer said. “I think the environment is baked.”
Cramer also said that new compelling research suggests that changing fashion trends can breathe new life into both companies, creating buying opportunities that investors can face. “This upgrade has changed my mind about VF Corp and Kontoor,” he said. “Bottom line, I think both stocks are buys.”
VF Corp YTD
Truist and Piper Sandler both raised their ratings on VF Corp to buy — and coincidentally, both outlets set price targets of $20, meaning a 17% upside to Thursday’s close.
Cramer was particularly encouraged Tuesday by Piper Sandler’s note, which accompanied the survey of teenagers really fell. A read on what young consumers like shows a growing interest in non-athletic footwear. That could be welcome news for Vans, whose sales have fallen for four consecutive fiscal years, including double-digit drops in each of the past three years.
Piper Sandler’s survey offers signs that Vans may finally be stabilizing – ranking as the seventh most popular footwear brand among teenage boys after years of slipping down the ranks and rising to ninth among high-income teenage boys. The struggling skateboarding sneaker brand is the biggest obstacle to VF Corp’s turnaround under CEO Bracken Darrell, who takes over in July 2023. Vans sales are down nearly 50% from fiscal 2022, while The North Face and Timberland have fared better.
Speaking of other brands, Timberland entered the top 10 footwear brands among high-income teenagers for the first time in the survey’s history, while The North Face returned to the top 10 athletic apparel brands among the group. “If the teenage survey says buy VF Corp, then I have to say it [buy, buy, buy]”said the “Mad Money” host.
Truist also expects Vans to benefit as consumers shift from athletic footwear to more fashion-oriented styles. With VF Corp trading at about 16 times 2027 earnings estimates, Cramer said that “if Vans ends up improving, then this is definitely a winner.”
Kontoor Brands YTD
For Kontoor, Jefferies upgraded the stock to buy from hold and raised its price target to $89, representing a 22% upside from Thursday’s close.
Analysts say that the recent rise in popularity of denim could be a lasting change. He identified Kontoor as one of the two biggest potential beneficiaries, with Wrangler well positioned to capitalize on the trend.
According to Jefferies, Kontoor’s planned $400 million share buyback program provides another reason to like the stock. The buyback represents approximately 10% of the company’s market cap.
Cramer also highlighted Kontoor’s acquisition of Helly Hansen last year as an underappreciated growth opportunity. The outdoor clothing brand should become a bigger part of the company’s business after Kontoor finalized the sale of the denim brand Lee to Original Brands. The deal, valued at up to $1 billion, was announced in May and is expected to close by the end of this year.
With Kontoor trading at about 14 times 2026 EPS estimates, Cramer said the stock offers an attractive way to capitalize on the denim revival without paying a premium. “It’s a smart investment,” he said.
