VFC - V.F. Corp turnaround may take longer as activist reveals stake - analysts

2023-10-18 14:47:26 ET

Although V.F. Corp. ( NYSE: VFC ) shares surged 14% on Tuesday in the wake of news of a stake from activist Engaged Capital, a real turnaround of the apparel and footwear company is likely to take a long time, according to analysts.

"We see the presence of an activist potentially accelerating the pace of change at the company, which is a positive, but ultimately believe brand turns take time (even moreso in a challenging wholesale sell-in environment, which is over 50% of the business), and continue to believe the turn may take longer than anticipated," BTIG analyst Janine Stichter, who has a neutral rating on VFC, wrote in a note on Tuesday.

Engaged believes V.F. Corp. ( VFC ) can realize a mid-$40 share price within three years, according to a copy of a presentation presented at an activist investor conference on Tuesday. Engaged is looking for VFC to make operational improvements, including cutting costs that may be worth more than $300 million a year.

The activist also wants the company to conduct a strategic review of its noncore assets and real estate and possibly look to refresh its board. Some brands VFC could look to unload include Timberland, Dickies, Supreme, and Smartwool.

The activist push at V.F. Corp. ( VFC ) comes as its shares dropped over 40% this year through Monday, and the company tapped former Logitech International ( LOGI ) CEO Darrell as its new CEO in late June.

Barclay's analyst Sticher is not alone in thinking any VFC turnaround is not going to happen overnight.

"While we agree regarding many of the issues that have plagued the company, we view the path forward to be difficult and likely to take time to materialize," Barclays analyst Adrienne Yih, who has a $19 price target on VFC, also wrote in a note on Tuesday. Glenn Welling, the principal and founder of Engaged, is said to have had "constructive" talks with VFC CEO Bracken Darrell, according to a WSJ report on Tuesday.

"While clearly the mistakes of the past are known, the go-forward in our view is likely to continue to be difficult and will take time with no quick fix, as the company needs to invest behind innovation at Vans while maintaining North Face's momentum at a time when it will also need to prioritize addressing its capital structure, take costs out of the business, and divest assets," Barclay's Yid added.

More on V.F. Corp

• V.F. Corporation: Activist Involvement Confirms Strong Value Proposition (Upgrade)
• V.F. Corp.: Think Twice Before Buying The Dip
• V.F. Corp.: A Real Value Trap - Avoid Catching This Falling Knife (Rating Downgrade)
• V.F. Corp soars as activist Engaged Capital discloses stake (update)
• Pick Skechers over Vans-maker VFC amid uncertainty: Piper Sandler

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