VF hopes it looks good in Nautica.

• Author: Speizer, Irwin
• Position: Money Matters

Among the riches-to-rags tales of the Tar Heel textile and apparel industry lies a company cut from a different cloth. VF Corp. of Greensboro (NYSE: VFC) has not only avoided bankruptcy, it has kept generating operating profits, aided by its Wrangler and Lee jeans.

VF's strong suit has been its concentration on its core business, though it occasionally has bought others. "They haven't tried to reach the moon," says analyst Jeffrey Edelman of UBS Securities in New York. "They have been very conservative and tried to manage the business for profitability rather than growth."

But sticking to its knitting in a frayed economy won't produce the earnings growth investors demand. VF sales slipped from $5.4 billion in 2000 to $5.1 billion in 2002 and should remain flat this year. Earnings per share have declined, too, dropping 14% to 68 cents in the second quarter compared with the same quarter a year ago. More bad news: This summer, Levi Strauss & Co. started cutting into VF's high-volume business at Wal-Mart stores with a new line of discount jeans.

In July, VF announced it would buy New York-based Nautica Enterprises, a high-end clothing maker that had lost its marketing edge and watched earnings per share fall from $1.39 two years ago to 60 cents in its latest fiscal year. VF hopes to close the $585.6 million deal this year...