VF Corp. Explores Strategic Alternatives for Work Brands

VF Corp. is looking to sharpen its portfolio once again.

The Vans and Timberland parent — which spun off its jeans business over the summer — announced today that it was reviewing strategic alternatives, including a sale, for the occupational portion of its work brands segment.

In a press release, the firm shared plans to streamline its portfolio of active, outdoor and work labels. The division in review is comprised of nine brands and businesses, including Red Kap, Bulwark, Terra, Work Authority and VF Solutions. (VF reaffirmed its commitment to the Dickies and Timberland Pro brands, which are not part of the review.)

“Driving and optimizing our portfolio continues to be a top strategic priority for VF, and exploring strategic alternatives for our occupational work brands is the natural next step in that process,” chairman, president and CEO Steve Rendle said in a statement. “Divesting these brands would leave VF with a simplified portfolio of higher-growth, consumer-focused brands, while providing financial flexibility to fuel further strategic initiatives and enhance shareholder value.”

He added, “The occupational portion of our work segment is a compelling business, marked by a strong and consistent financial profile and valuable customer relationships. Our teams have done an excellent job building this business over many years, putting us in an ideal position to find the best future owner for these brands.”

In May, VF completed the separation of its more profitable active and outdoor businesses including Vans, Timberland and The North Face from Kontoor Brands Inc., which houses heritage denim brands Wrangler and Lee as well as VF’s outlet operations. (Kontoor is now an independent, publicly traded company under the stock ticker “KTB.”)

Susquehanna Financial Group analyst Sam Poser was bullish on the firm following news of a possible divestiture, which would slim down VF’s portfolio from 21 to a dozen brands.

“The pruning of the lower growth brands from the portfolio is a logical step for VF,” Poser wrote in a distribution note, adding that a potential sale “positions VFC for a large acquisition in the near future” and “simplifies and reduces [the] complexity of the business.”

Today’s announcement comes just days before VF reports its third-quarter financial results. In late October, the Denver-based firm posted profits that were up nearly 28% to $649 million, or adjusted earnings per share of $1.26, but below consensus bets of $1.31. Revenues, however, rose 5% to $3.4 billion — roughly in line with expectations — driven by top performers Vans and The North Face as well as VF’s direct-to-consumer and international businesses, particularly in China.

For the full year, VF still expects sales of around $11.8 billion and adjusted earnings per share in the range of $3.32 to $3.37. (Wall Street, however, was predicting revenues of $11.9 billion and EPS of $3.39.)

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