Vans, North Face Owner VF Corp Launches Transformation Strategy Following Investor Pressure

Vans' dismal performance is a large part of what is prompting a turnaround push at owner VF Corp.

VF Corp, parent company of brands including The North Face, Vans, Timberland and Supreme, has unveiled its “Reinvent” transformation strategy after another disappointing quarter and pressure from a new activist investor in its ranks.

VF Corp shares are down nearly 50% this year, and while expected, lackluster results in the company’s latest earnings haven’t helped matters. For Q2 of fiscal 2024, which ended Sept. 30, 2023, The North Face and international businesses (namely China and Europe) were VF Corp’s only bright spots, with losses reported in nearly every other part of the business. The Vans brand is particularly challenged, with revenue down 23% in constant dollars from last quarter.

As a result, Vans CEO Kevin Bailey is stepping down from the position, and while a replacement is sought VF Corp President and CEO Bracken Darrell will “take a more active role” in the brand. Bailey isn’t leaving the company, but will instead lead the company’s newly launched transformation effort, a key component of which is the leadership switch-up at Vans. Other elements of the plan include:

  • Improve North American results: A shift in operating model aims to establish a “global commercial structure” for the business that will include a new regional platform focused on the Americas, and structured similarly to how the company currently runs its APAC and European divisions. To execute this, Martino Scabbia Guerrini has been promoted to the newly created role of Chief Commercial Officer.
  • Reduce costs: By removing spend in “non-strategic areas of the business” and simplifying and right-sizing its structure, the company hopes to achieve $300 million in fixed cost savings.
  • Strengthen the balance sheet: The company is taking a range of steps to reduce its debt and leveraging, including a reduction in its shareholder dividend this quarter.

“Despite pockets of continued strong performance throughout the first half and solid profit margins in the second quarter, it’s not enough, and we are not making sufficient progress at Vans or in the U.S.,” said CFO Matt Puckett in a statement. “Our transformation plan, Reinvent, directly addresses these areas in particular and importantly, commits to lowering our cost structure by $300 million. Through this effort and our ongoing evaluation of all aspects of our business, we remain laser-focused on cash generation and debt reduction, with the intent to return to growth, drive higher ROIC and reduce leverage.”

Many of the changes laid out in the Reinvent strategy are in line with the demands of activist investment firm Engaged Capital, which took a stake of an undisclosed size in VF Corp in October 2023. Engaged told CNBC that it was specifically pushing for upwards of $300 million in cost-cutting measures and a commitment to hold off on acquisitions. Engaged blamed former VF Corp CEO Steve Rendle for the challenges the business is facing, but said it is generally supportive of his replacement Bracken Darrell, who took over the position in June after Rendle’s abrupt departure in late 2022. “Mr. Darrell appears to have the transformation experience VFC urgently requires,” a representative of Engaged told CNBC.

“In my first 100 days, as I have spent time with our brands, teams and customers around the world, I have developed even stronger conviction in the company’s significant potential, which is far greater than what we are delivering today,” saidDarrell in a statement. “Our transformation plan will improve our brand-building and execution while addressing with urgency our top priorities of improving North America, accelerating the Vans turnaround, significantly reducing our fixed costs and reducing leverage. We are excited about the long term, starting with these first major steps toward improving our near-term performance, positioning us to return to growth and generate shareholder value.”