VF Corp. took its first steps in spinning off its jeans business Monday and, in doing so, revealed some of its vital statistics.
In a filing to the Securities and Exchange Commission, VF announced that the spin-off of its jeans brands Wrangler, Lee and Rock & Republic and its outlet business into a separate entity called Kontoor, first announced in August, is on track to be completed sometime next month.
“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,” Steve Rendle, chairman, president and chief executive officer of VF, said in a statement.
“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.”
The idea behind the move is to separate the relatively staid jeans brands from VF’s best-performing names, Vans and North Face. As part of the deal, Kontoor, which will stay in North Carolina while VF will move to Denver, will get its own dedicated management team that can focus on capturing a bigger slice of the resurgent denim market — a category that is bouncing back after some tough ath-leisure competition.
Its executives will also no doubt be hoping that it can ride the waves of Levi Strauss & Co.’s blockbuster return to the stock market last month.
The filing laid bare the reasoning behind the separation: VF’s remaining brands generate $11 billion in sales, while earnings before interest, taxes, depreciation and amortization clock in at $1.8 billion. This dwarfs Kontoor’s sales of $2.7 billion and EBITDA of $385 million.
As for the long-term prospects, VF’s revenue growth is expected to be in the high single digits, while Kontoor is forecast to be in the low single digits.
“Today’s filing marks an important milestone in the process of establishing Kontoor Brands as an independent company,” said Scott Baxter, named ceo of Kontoor.
“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 is not the only company in the break-up stage. Gap Inc. announced recently that it is splitting itself into two publicly traded companies. One will be made up of Old Navy, while the other — a yet-to-be-named company — will consist of Gap, Athleta, Banana Republic, Intermix and Hill City.
Elsewhere, Barington Capital Group, an activist investment firm led by James Mitarotonda, is pushing for L Brands Inc. to separate the long-suffering Victoria’s Secret from Bath & Body Works, which is going from strength to strength.
VF’s stock closed up 42 cents, or 0.5 percent, to $87.33.