VFC VF Corporation

Clothier to focus on faster-growing brands as customers choose yoga pants over jeans

By Kimberly Chin 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (August 14, 2018).

VF Corp., owner of Lee and Wrangler jeans, plans to spin off its denim business in a bid to sharpen its focus on faster-growing outerwear and activewear brands.

VF said Monday it wants to create the yet-unnamed company through a tax-free spinoff to its shareholders. The newly formed company will hold VF's jeans business, which includes Wrangler, Lee, Rustler and Rock & Republic, and its 80 VF outlets. These businesses generate about $2.5 billion in annual revenue, the company said.

The company acquired Lee, its first denim brand, in 1969. It added Wrangler, Rustler and JanSport to its portfolio through its purchase of Blue Bell Holding Co. in 1986.

The Wall Street Journal reported Friday VF was exploring strategic options for its denim business, citing people familiar with the matter.

In Monday trading, shares of VF fell 3.6% from Friday's record close to $92.82.

The apparel conglomerate has moved in recent years to shed some of the classic American brands in its portfolio. In the past few years, the company has sold denim brand Seven for All Mankind, the apparel brand Nautica and divested from its stake in the Majestic brand, the official supplier of Major League Baseball uniforms.

VF said the moves would allow the company to focus on its active and outdoor brands, like the North Face, JanSport and Eagle Creek. VF, which also owns Vans, Timberland and Dickies, estimates the core company will generate more than $11 billion in annual revenue.

Scott Roe, VF's finance chief, said on a conference call Monday that mergers and acquisitions would remain a priority and the spinoff would give flexibility to pursue larger deals and investments.

Sales of Wrangler and Lee jeans have slowed in recent years as jeans have fallen out of favor with consumers who instead opt for yoga pants or premium brands like J Brand or Frame. In 2017, VF's denim business generated $2.66 billion in sales and $422 million in profit. Sales were down 3% from the prior year, while profit fell 14%.

Credit Suisse analysts said in a note that challenges facing midtier department stores, a key sales channel, have also helped stall revenue growth. Revenue from VF's jeans segment has hovered between $2.6 billion and $2.8 billion for the past 10 years, the note said.

VF said Monday it plans to move its global headquarters to the Denver metro area from Greensboro, N.C. Meanwhile, the new company will be based in Greensboro.

VF expects to complete the spinoff in the first half of 2019. Scott Baxter, currently VF's group president for its Americas West region, will serve as CEO of the new company.

Barclays is acting as financial adviser to VF.

Write to Kimberly Chin at kimberly.chin@wsj.com

(END) Dow Jones Newswires

August 14, 2018 02:47 ET (06:47 GMT)

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