Will VF Corp.’s Data Breach Impact Its Transformation Plan? Analysts Weigh In

A Dec. 13 cybersecurity breach at VF Corp. will likely hurt the shoe company’s sales throughout the holiday season — but a long-term negative impact to the company is unlikely, according to some analysts.

The footwear and apparel conglomerate, which owns Vans, The North Face and other brands, announced in a filing this week with the Securities and Exchange Commission that it has begun an investigation into “unauthorized occurrences on a portion of its information technology systems.”

VF said the breaching party stole data from the company and disrupted its business operations, including its ability to fulfill orders. VF noted in the filing that the full extent of the impact is yet to be determined, though the “incident has had and is reasonably likely to continue to have a material impact on the company’s business operations.”

A VF spokesperson told FN sister publication WWD in a statement that “the company will continue to review its security measures to look for opportunities to strengthen resiliency in an ever-evolving threat landscape.”

According to a note from BTIG analyst Janine Stichter, VF confirmed that while a disruption during the holidays is “far from ideal,” the wholesale business, which has already shipped its holiday merchandise, is facing less severe impact than its DTC arm.

However, she noted that this disruption could still be a bad look to VF’s wholesale partners as the company tries to rebuild its credibility after a rough period of supply chain delays and product challenges with the Vans brand.

Given the lack of visibility regarding recovery for this incident, Stichter reiterated a Neutral rating for the stock.

In terms of calculable damage, Baird analyst Jonathan Komp estimated that VF could lose 50 percent of its U.S. e-commerce sales during an average December day, which could translate to about $3 million to $5 million of lost revenue per day. Komp further noted that costs to fix IT and potentially expedite shipping could represent a “more material” impact, but said that “VFC should recapture expenses and lost sales/profit over time through cyber insurance claims.”

In addition to the busy holiday season, the data breach occurs during an overall era of change for VF under its new CEO, former Logitech International chief Bracken Darrell, who was appointed to the leadership role in June. In October, Darrell laid out a strategic business transformation plan, part of which involved revitalizing the struggling Vans brand with a new president as Vans global brand president Kevin Bailey steps down from the position.

With this transformation plan in motion, a security breach is even more unwelcome. And while it will almost certainly cause issues this holiday season, BMO analyst Simeon Siegel predicted the company’s turnaround plan should still be on track.

“We believe the incident impacts the ability to fulfill e-commerce and wholesale orders, with the former a clearly material impact given the importance of these days for holiday selling,” Siegel said. “We also believe this is largely a North America issue. Clearly, this is not what VFC needs right now, though we’d also assume this should not have [a] long-term bearing on the company’s turnaround.”