In a presentation, California-based activist investor Engaged Capital outlined that the parent company of Vans, The North Face (TNF), Timberland, Supreme and others is suffering from bloated overhead that is driving down shareholder value and called for a more detailed turnaround plan for VF Corp. It said that the overhead is eating into the margins of the still-thriving Vans and TNF brands. The private equity firm attracted media attention earlier this year for its involvement with fast-food chain Shake Shack and its previous investments in Rent-a-Center and other companies. Engaged Capital’s stake in VF Corp. was not disclosed, but it is said to be one of the company’s ten largest shareholders, according to the Wall Street Journal.
Engaged Capital’s turnaround plan calls for cutting more than $300 million in expenses by eliminating duplicate costs and corporate excess while restoring brand autonomy, with about $100 million of the savings to be reinvested to drive innovation and growth. The company plans to bring in outside advisors to explore divesting non-core brands, i.e., everything except the two major brands, Vans and TNF. All excess cash flow and divestment proceeds will be used to reduce debt, with the company publicly committing to no new mergers and acquisitions. Vans accounted for 32 percent of $3.7 billion in sales, while TNF accounted for 31 percent of $3.6 billion. Timberland followed with $1.8 billion and 15 percent of sales, followed by Dickies at 6 percent, Supreme at 5 percent and the remaining brands at 11 percent.
In the presentation, the investment firm also said former VF Corp. CEO Steve Rendle made a number of strategic mistakes during his tenure, including reducing the autonomy of individual brands, underinvesting in Vans and acquiring the Supreme brand, which hurt the bottom line. Rendle was named CEO in early 2017 and became chairman shortly thereafter. He left VF late last year. Engaged Capital continued by highlighting the appointment of Bracken Darrell as CEO in July of this year, noting that in his ten years at Logitech, revenue grew 2.2-fold to $4.54 billion, with Ebitda up 6.6 percent to $665 million and margins up from 4.8 to 14.6 percent. For comparison, it cites its $2.1 billion acquisition of streetwear brand Supreme at an Ebitda multiple of 15 under Rendle, which pushed net leverage up 36 percent from 3.3 to 4.5x.
Engaged Capital claims its plan could boost VF Corp.’s stock price from its current $15 to $46 by fiscal 2026, noting that the company has suffered an 85-percent drop in value from a peak of $100 in December 2019 to $15.45 in September 2023, blaming Rendle’s tenure for an increase in corporate costs, a poor M&A strategy and a reduction in brand autonomy.
The market reacted positively to the investor’s announcement, sending shares up 14 percent on Oct. 17.
