VF to Spin Off Wrangler and Lee -- WSJ
August 14 2018 - 3:02AM
Dow Jones News
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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