VF’s Kontoor spin-off takes shape
today Apr 2, 2019
Greensboro, North Carolina-based apparel company VF Corporation made a filing with the US Securities and Exchange Commission (SEC) on Monday, laying out the terms of the impending separation of its denim business and revealing details concerning the recent financial performance of its different brands.
First announced in August of last year, the spin-off will see VF’s denim labels Wrangler, Lee and Rock & Republic, along with the VF Outlet business, become a separate publicly traded company named Kontoor Brands, Inc., based in North Carolina. The group’s remaining brands, including Vans, The North Face and Timberland, will continue to be operated as part of VF Corporation, which will move to Denver.
11-year VF veteran Scott Baxter has been named as Kontoor's president and CEO, bringing broad industry experience to the position from prior roles at Home Depot, PepsiCo and Nestlé.
Previously chief financial officer for Americas East at VF, Rustin Welton will now be taking on the CFO role at Kontoor, where he will be joined by Thomas Waldron and Christopher Waldeck, US brand presidents for Wrangler, and Lee and Rock & Republic, respectively, who will become global president of each of their brands at Kontoor.
Lauren Krueger has also joined the company as VP and general counsel, having most recently served as EVP, general counsel and corporate secretary at Signet Jewelers.
The spin-off process, which is expected to complete in May, is subject to final approval from VF’s board, as well as customary regulatory and legal conditions.
“Our teams across VF have made tremendous progress to prepare for the successful separation of Kontoor Brands from VF and this filing is a significant next step in this process,” said VF CEO Steve Rendle in a release. “We are highly confident that the separation is the best path forward for both organizations to achieve even greater potential and enhance long-term shareholder value.”
While outlining the terms of the separation, Monday’s SEC filing also revealed the financial performances of VF’s different businesses, going some way to explaining the reasoning behind the break-up.
In 2018, the brands which will form Kontoor generated some $2.7 billion in revenue, a comparatively weak performance when compared to sales at VF’s remaining labels, which collectively totaled $11 billion in the same period. Similarly, EBITDA at Kontoor’s denim brands came to $385 million, compared to $1.8 billion at VF’s other labels.
Furthermore, while the brands that will continue to operate as part of VF Corp are expected to see high single digit revenue growth in the long term, the businesses that will make up Kontoor’s portfolio are currently predicted to post revenue increases in the low single digits.
As highlighted by VF, the separation of the businesses will therefore allow both to “focus investment on strategic priorities” and will give Kontoor, in particular, a better shot at taking full advantage of denim’s comeback as the popularity of athleisure begins to ebb.
“Today’s filing marks an important milestone in the process of establishing Kontoor Brands as an independent company,” explained Baxter. “As we prepare for life as a separate, publicly traded organization, I am confident that Kontoor Brands is strongly positioned to thrive as a leader in the global apparel industry and deliver long-term value for all of our stakeholders.”
VF isn’t the only American fashion giant looking to streamline and refocus operations by spinning off brands into a new company. Earlier this year, Gap Inc. announced that it would split into two separate publicly traded companies, spinning off its consistently strong Old Navy brand in order to focus on turning its underperforming namesake label around.
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