Engaged Capital, the influential activist investor, has made a strategic investment in VF Corp, the parent company of renowned brands such as Vans and Supreme. In a decisive move, Engaged Capital is urging VF Corp to enhance its financial stability by divesting non-core assets to significantly reduce its debt obligations.
Headquartered in Denver, VF Corp is now urged by Engaged Capital to engage financial experts for a comprehensive assessment of non-core divestitures. Furthermore, the investor recommends that VF Corp publicly commits to refraining from new acquisitions to prioritize fiscal health.
Engaged Capital’s proposal also underlines the prudent use of excess cash flow and divestiture proceeds to retire debt. As of July 1, VF Corp’s debt stood at approximately $7.9 billion, according to Bloomberg data. The investor also advocates the appointment of new board members to rejuvenate corporate governance.
This news has ignited a surge in investor confidence, with VF Corp witnessing a remarkable 12% increase in stock price to $18.09 during early New York trading on Tuesday, elevating the company’s market value to $7 billion.
As of now, representatives from VF Corp and Engaged Capital have not released official statements in response to this strategic development.
VF Corp, alongside other players in the apparel industry, has encountered formidable challenges, including supply chain disruptions and the need to maintain brand relevance. The company, which also boasts ownership of brands such as North Face and Dickies, welcomed a new Chief Executive Officer in June as part of its strategy to navigate soft sales growth.
In the previous year, VF Corp acknowledged the cautious approach of its wholesale partners due to shifts in consumer demand, leading to increased order cancellations. The company’s commitment to financial stability was evident in its decision to reduce dividends in February, a measure aimed at reducing its debt load.
