Shares of global apparel and footwear maker VF Corporation (NYSE:VFC) are receiving a much-needed lift on Tuesday, popping up more than 13% as of this writing. Catalyzing the robust sentiment is news that an activist investor has taken a stake in the company. After suffering years of disappointing performances in the charts, VFC stock may be due for a shakeup.
According to Seeking Alpha, Engaged Capital recently acquired shares of VF Corporation, which owns well-known brands like Vans and The North Face. Primarily, the activist investor is seeking cost-cutting measures to deliver operational improvements that “may be worth more than $300 million a year.” In addition, Engaged wants the company to conduct a “strategic review of its noncore assets and real estate and possibly look to refresh its board.” Perhaps most notably for consumers, potential cost cuts could also translate to the unloading of some VF brands, such as Dickies and Timberland.
Adding to the enthusiasm for VFC stock, reports indicate that Engaged Capital Principal and Chief Investment Officer Glenn Welling has had “constructive talks” with VF Corporation CEO Bracken Darrell. Therefore, a positive change could be coming for this struggling enterprise.
VFC Stock Pops After Years of Futility
According to CNBC, VF Corporation is supportive of Darrell, who took the helm of CEO in July. From public statements from both the apparel firm and the activist investor, the two entities also seem to have the same broader goal in mind: Revitalize VF Corporation and bolster the positioning of VFC stock.
It is unclear how much of a stake Engaged took in the company. What’s more clear, however, is the need for VF to reverse course. Engaged claims that former CEO Steve Rendle, “who abruptly left the company late last year, made a series of strategic errors during his tenure.” The activist investor stated that these misses include “reduced autonomy among individual brands” and underinvestment in certain key acquisitions.
Notably, VF’s three-year revenue growth rate (on a per-share basis) comes in at 4.5%, only modestly better than the underlying sector’s median value of 2.75%. However, to Engaged’s point about unlocking value, VFC stock trades at a forward price-to-earnings (P/E) multiple of 8.9 times. That’s noticeably below the sector median forward P/E ratio of about 10 times.
Why It Matters
At the moment, analysts peg VFC stock as a consensus hold on TipRanks. This assessment breaks down as three buy ratings, 10 holds and two sells. Overall, the average price target for shares lands at $21.71, implying about 18% upside potential as of this writing.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
