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V.F. Corp to Sell Reef Brand as Part of 2021 Growth Strategy

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V.F. Corporation (VFC - Free Report) has agreed to sell its premium lifestyle brand, Reef, to The Rockport Group of Newton, MA. The deal, which is likely to close this month, is in sync with the company’s long-term business strategy. Following the divestiture, Reef is expected to operate as a sovereign brand under Rockport and also maintain its Carlsbad, CA headquarters. However, terms of the deal, which is conditioned upon customary closing, remained under covers.

Leading shoemaker, Rockport is a portfolio company of Charlesbank Capital Partners, LLC — an equity investment firm — that recently bought Rockport. As Reef is a strong brand with a huge evolution and customer base, V.F. Corp believes Rockport is fit to take the brand to its next phase of growth.

Notably, this agreement reflects that V.F. Corp has been smoothly progressing with its five-year strategic growth plan, alias, 2021 growth strategy. Under the plan, the company’s four-point strategy is focused on redesigning portfolio and empowering its key brands, adopting a consumer and retail-centric model, enriching direct-to-consumer and digital businesses, and directing investment to Asia, particularly China.

These growth plans will be aided by increased investments in design and innovation; demand creation and brand experience; insights and analytics; retail excellence; demand and supply chain agility and talent. The strategy targets generating cumulative operating cash flows in excess of $9 billion in the five-year period (between 2017 and 2021) and returning about $8 billion to shareholders in the form of dividends and share repurchases. Further, it anticipates five-year compounded annual revenue growth rate (CAGR) of 5-7% through 2021, courtesy of strong performance of the Vans, the North Face and Timberland (big three brands) as well as gains in the international and direct-to-consumer businesses. In 2021, earnings per share growth are expected to reach 11-13% at a five-year CAGR.

V.F. Corp’s recent moves to reshuffle its brand portfolio and drive growth include the buyout of Altra footwear brand from ICON Health & Fitness, Inc., and the acquisition of outdoor and sports apparel company — Icebreaker Holdings Ltd. While the acquisition of Altra is likely to boost growth across the company’s direct-to-consumer and international channels, the addition of the Icebreaker brand is expected to enhance its SmartWool brand portfolio. Simultaneously, management has offloaded the Nautica brand to Authentic Brands Group, LLC — a leading brand-development and entertainment company in New York.

Additionally, V.F. Corp revealed plans to spin-off its Outlet business and Jeans division, including the iconic denim brands like Lee and Wrangler in August. This will result in the splitting of company into two independent publicly traded companies. One of these will be V.F. Corp with its global apparel and footwear businesses and the other will be a newly formed entity, which is still not named (NewCo), comprising V.F. Corp’s Jeans and Outdoor businesses. The spin-off is expected to be completed in the first half of 2019.


 

Shares of V.F. Corp decreased 2.5% yesterday. Nevertheless, this Zacks Rank #2 (Buy) stock has gained 12.8% in the last three months, outperforming the industry’s 5.5% rally.

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