US clothing giant VF Corp has revealed it is exploring strategic alternatives for its Licensed Sports Group (LSG) business, a move which could be the first in a larger portfolio transformation, according to one analyst.

LSG, a division of VF's Imagewear coalition, which includes the Majestic brand, supplies apparel and fanware through licensing agreements with US and international professional sports leagues, colleges and universities, and lifestyle brands.

"As active portfolio managers, we constantly assess the composition of our company to ensure VF's portfolio is aligned with our strategic objectives and positioned to maximise growth and return to our shareholders," said VF chairman and CEO Eric Wiseman. "In this respect, we are exploring options for our LSG business to position the organisation to continue its success and achieve its future potential."

Revenues for VF's Imagewear coalition reached US$1.1bn in 2015, with LSG representing about half of that amount. The review of strategic alternatives does not include the Image division of VF Imagewear, which produces workwear for workers in the industrial, service and government sectors.

UBS analyst Michael Binetti noted: "Selling LSG would make strategic sense in our view as VF Corp transitions its portfolio toward higher growth/higher margin businesses," later adding that the move "is likely the first move in a larger portfolio transformation". 

Meanwhile, Cowen and Co analyst John Kernan added that a potential sale of VF's LSG business could raise $500-800m in pre-tax cash based on comparable transactions. 

"With 74% of VF Corp's cash reinvested overseas (versus 54% in FY14), this could support VF Corp's ability to finance an acquisition but more likely its share reposition and dividend."

He added that logical buyers of the LSG are Hanesbrands, Gildan Activewear, G-III Apparel and private equity.