VF Corporation announced several big pieces of news this morning including that it is spinning off its jeans business and is moving its outdoor brands to a new headquarters in Denver.
Lots of VF employees will be faced with some big relocation decisions soon.
The new spin-off company will consist of the Lee and Wrangler brands and will be based in Greensboro, North Carolina, the current headquarters for VF Corp. Wrangler is already based there, and Lee will move from its current headquarters in Kansas City.
Scott Baxter, currently VF Group President for Americans West, will become the CEO of the jeanswear spin-off. We hear from VF leaders that we know that Baxter is very well regarded internally.
Baxter will be replaced at VF in the interim by a familiar face – Steve Murray, previously the president of Vans and leader of the former Action Sports Coalition. VF CEO Steve Rendle said on a conference call that brands that currently report to Baxter will report to Steve. According to VF’s website, the global North Face, Smartwool and Reef brands currently report to Baxter.
VF Corp. will move its corporate headquarters to Denver and the North Face, Jansport, Smartwool, Altra and Eagle Creek brands will move to Denver as well.
That means a lot of employees will have to decide if they will move to Denver in the future. North Face and Jansport are currently headquartered in Alameda, Calif., Eagle Creek is based in Carlsbad, Smartwool is based in Steamboat Springs, Colo., and Altra’s current home is in Logan, Utah.
VF said the spin-off will allow VF to sharpen its focus as a “consumer-centric and retail minded organization anchored in activity-based lifestyle brands.”
The company listed the benefits as enhanced management focus, reduced operational complexity, more opportunity to focus on growth opportunities, and a more flexible structure.
The slimmed down VF will have $11 billion in annual sales with a mid-teen shareholder return target. It will include all the remaining VF brands including Vans, Timberland, Dickies, Jansport and Reef and many others.
The denim business will have $2.5 billion in annual sales and a high-single digit to low double-digit shareholder return target. The new company will be publicly traded and will have $1 billion in new debt.
On a conference call with analysts this morning, executives said several times the slimmed down VF will have more flexibility to pursue M&A opportunities as well.
VF is expected to complete the spinoff of the jeans business during the first half of 2019. It has not yet come up with a name for the new company.
VF’s move to Denver will start this time next year and will be phased over 12 to 18 months. The cost of relocating the corporate headquarters and the outdoor brands is estimated to total $60 million to $70 million over three years.
The stock market did not appear to embrace VF’s plan at first blush. The company’s stock is down nearly 5% to $91.81 in trading this morning.
