Engaged Capital on Tuesday hailed the arrival this summer of former Logitech chief executive Bracken Darrell as VF Corp’s CEO, but slammed the apparel conglomerate’s sliding performance and demanded further change.
The investment firm said VF Corp. must cut costs by more than $300 million, invest some $100 million into its two biggest brands (The North Face and Vans), refrain from further acquisitions and revamp its board membership.
Engaged, whose stake in VF has yet to be disclosed, in a presentation released Tuesday blamed the strategy devised by longtime VF executive Steve Rendle during his nearly six-year stint as CEO. By email, an Engaged spokesperson noted a press report that the firm is now among the apparel company’s top 10 shareholders.
In an emailed statement, VF Corp. said it’s aware of Engaged’s comments, values its shareholders’ views and seeks “an open dialogue” with Wall Street. “VF has globally recognized and iconic brands and best-in-class talent. VF’s Board and leadership team, including our recently appointed CEO Bracken Darrell, are taking immediate and decisive actions to strengthen the company’s position and return VF to strong, sustainable, and profitable growth in the interests of all our shareholders,” the company said.
Comparing VF's headquarters to a “Death Star,” Engaged lambasted many of Rendle's key actions. A headquarters move to Denver from Greensboro, North Carolina, “drove massive spend and significant employee turnover;” his reorganization of the business was “failed” and “overly complex;” and the $2.1 billion acquisition of cult brand Supreme in 2020 was “the culmination of a flawed strategy” that expanded its debt. Rendle left the top post abruptly late last year.
Specifically, the investment firm said a reorganization of the company sapped individual brands’ autonomy to devise their own strategies, which hurt Vans most of all. The skate footwear brand until recently was the company’s best performer. In its presentation, the firm quotes an unnamed former VF executive saying that “Brands were reorganized to serve the center rather than the center serving the brands.”
Engaged also said that, while Darrell’s presence bodes well, the board must be shaken up because it was complicit in the execution of a doomed strategy and “cost explosion.”
Wedbush analysts led by Tom Nikic said there isn’t much to argue with in Engaged’s report. But some of the firm’s proposals, including debt reduction and investment in Vans, are already underway, and some of Vans’ troubles are due to outside forces.
“Clearly, VFC has not performing up to expectations (either internal or external expectations), and it's hard to push back aggressively against the crux of Engaged's argument,” Nikic said. “While some of their proposals already seem to be in motion ... it could take time for these initiatives to bear fruit, and in the meantime we think Vans continues to struggle amid a highly-competitive footwear industry.”
Clarification: This story has been updated to reflect a statement from Engaged Capital that its reference to the "Death Star" applies solely to VF Corp.'s headquarters.
