Wed, Aug 15, 2018 - Page 10 News List

VF to spin off jeans, focus on athleisure

Bloomberg

VF Corp, which rose to prominence on the strength of its Lee and Wrangler jeans, wants to pivot away from denim to focus on faster-growing trends such as athleisure and outdoor apparel.

The spin-off to shareholders, which would allow VF to retain trendier brands like North Face, Timberland and Vans, should be completed in the first half of next year, the company said in a statement on Monday.

The jeans business, which has yet to be named, would remain a public company based in Greensboro, North Carolina, while VF would move its headquarters to the Denver, Colorado, area — a mecca for outdoor sports enthusiasts.

Sales of denim have slowed over the past few quarters as consumers flock to the active-wear category, VF chief financial officer Scott Roe said, adding that jeans production also lacks overlap with the other product lines.

“Over time, the business models of the jeanswear business relative to the remaining portion of VF have diverged,” Roe said in an interview. “We just decided that VF is not the best owner of these iconic brands.”

Snapping up other companies or brands would be key for the new, denim-less version of VF, CEO Steven Rendle said.

The company might also invest in digital and data analytics.

However, share trading on Monday showed that Wall Street was skeptical of the move.

RBC Capital Markets analyst Brian Tunick said he had heard concerns from investors that the spin-out and change of headquarters over the next 12 months “could add some distraction.”

At the same time, the announcement of the new company has called investor attention to “how expensive the remaining VF Corp business is,” he said.

Scott Baxter, VF’s group president for its Americas West division, is to be CEO of the new jeans company, while finance executive Rustin Welton would be chief financial officer, VF said.

The jeans company would have estimated annual revenue of more than US$2.5 billion, compared with more than US$11 billion for the rest of VF.

In a conference call with investors, company officials said VF’s shareholders at the time of the spin-off would own 100 percent of both companies, with the final distribution ratio determined “later in the process.”

VF, once known as Vanity Fair Mills and founded in 1899 as Reading Glove & Mitten Manufacturing Co, has owned the Lee brand since the 1950s and Wrangler since the 1970s.

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