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V.F. Corp's (VFC) Denim Spin-off to be Named Kontoor Brands

V.F. Corp. VFC recently put forward the name for its jeanswear segment, which it expects to spin off as an independent, publicly traded company by the first half of fiscal 2019. The company came up with an innovative name — Kontoor Brands, which is a variation of the word ‘contour’. The name rightly represents the exclusive quality of each of its brands — including Lee, Wrangler, Rock and Republic brands as well as the VF Outlet business. Further, this name is a symbolization of enormous opportunities for the spun-off company’s evolution over the years.

The company has informed that Scott Baxter, the head of the VF jeanswear division, will assume the role of Kontoor Brands’ CEO. As part of its decision to spin-off this division, V.F. Corp. shifted its global headquarters from Greensboro to the metro Denver area in August 2018, thereby serving home for The North Face, Smartwool, JanSport, Altra and Eagle Creek brands as well as the company’s Global Innovation Center and Digital Lab.

Additionally, the company has announced that Kontoor Brands is going to be headquartered at 400 N. Elm St. in Greensboro, NC, which is currently the Wrangler brand’s base. Meanwhile, the Lee brand will move its headquarters from Kansas City to Greensboro.

The spin-off of the jeans division is subject to final approval by the company’s board and customary approvals beside tax and legal considerations. Additional information about Kontoor Brands — including the stock symbol, leadership team and vision — will be provided before the completion of the separation.

The decision to spin-off the denim business is in sync with V.F. Corp’s five-year strategic growth plan or 2021 growth strategy, which focuses on rapidly responding to the changing marketplace while targeting fantastic shareholder returns. The non-denim business after the spin-off will comprise V.F. Corp’s popular labels such as The North Face and Timberland, Altra, Icebreaker, and Williamson-Dickie. The Vans, and The North Face and Timberland brands that have emerged as the company’s core brands in recent years are generating a major share of its revenues.

On the completion of the spin-off, both companies are expected to gain from lesser managerial and operational activities and better management focus as well as flexible capital and operational structure. Further, the companies will benefit from optimized capabilities and investments in higher profitable projects, thus positioning for sustainable value creation.

While V.F. Corp’s shares have reacted a little to the new company’s name announcement, this Zacks Rank #2 (Buy) stock declined 8.7% in the past six months. However, this represents an outperformance against the industry’s decline of 15%.

 



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Some other top-ranked stocks in the same industry are Columbia Sportswear Company COLM and Crocs Inc. CROX, each sporting a Zacks Rank #1 (Strong Buy), as well as Ralph Lauren Corp. RL, carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Columbia Sportswear pulled off an average positive earnings surprise of 79.9% in the last four quarters. The company has long-term earnings growth rate of 10.8%.

Crocs, with an impressive long-term earnings growth rate of 15%, delivered an average positive earnings surprise of 126.3% in the trailing four quarters.

Ralph Lauren has long-term earnings growth rate of 10.3%. Further, the company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 7%.

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