VF Corp., the parent company of North Face, has made some major announcements due to increased pressure from activist investor groups. The company has withdrawn its guidance for the fiscal year and is also replacing the president of its Vans brand. In an effort to improve results in North America, reduce costs, decrease debt, and revamp the Vans brand, VF Corp. has introduced a new transformation plan. However, the recent quarterly revenue for Vans saw a significant decline of 21%, and sales in the Americas, excluding Vans, dropped by 11%. As a result, VF Corp.’s shares have fallen, with a decline of up to 18% in late trading in New York, leading to a 38% decrease in stock value this year.

Unfortunately, VF Corp. does not anticipate an improvement in the performance of its footwear brands in the second half of the fiscal year. Consequently, Kevin Bailey, the head of Vans, will be stepping down while the company conducts an external search for a successor. VF Corp.’s CEO, Bracken Darrell, will assist in leading the unit during this transition period.

The activist investor groups that have acquired stakes in VF Corp., Engaged Capital and Legion Partners Asset Management, have done so due to the company’s failure to meet expectations. Engaged Capital specifically wants VF Corp. to divest some of its brands and reduce its debt. The CFO of VF Corp., Matt Puckett, expressed disappointment at the lack of progress, stating that although there were pockets of strong performance in the first half and solid profit margins in the second quarter, it was not enough to make sufficient progress at Vans or in the US.

As a result of these challenges, VF Corp. has revised its outlook for the fiscal year. The company now expects free cash flow of approximately $600 million, down from its previous projection of $900 million. Furthermore, VF Corp. anticipates a more challenging wholesale environment in the US and acknowledges that its new strategy will likely result in additional charges, both in cash and noncash items.

In the most recent quarter, VF Corp.’s largest brand by sales was The North Face, followed by Vans and Timberland. The company is implementing a management shake-up and a new transformation plan in an effort to tackle the current challenges and regain the confidence of investors and Wall Street.

Useful Links:
CNBC: VF Corp. Q2 2021 earnings report
Forbes: VF Corp. breathes new life into Vans by restructuring