What Happened:
Shares of lifestyle clothing conglomerate VF Corp (NYSE:VFC) jumped 11.8% in the morning session after Reuters reported that activist investor Engaged Capital gained the support of VF Corp's founding family as it pushed for board seats and faster changes at the company. According to the sources, "Engaged Capital, led by Glenn Welling, has already influenced cost-cutting measures and strategic reviews at VF Corp and has identified director candidates with retail and turnaround expertise. The deadline for director nominations is imminent, and while VF's response remains unclear, the Barbey family stresses the urgency of implementing changes to benefit shareholders."
This move is notable given that activist investors often bring about significant changes in targeted companies, focusing on improving asset monetization, expense efficiency, and stock buybacks.
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What is the market telling us:
VF Corp's shares are somewhat volatile and over the last year have had 27 moves greater than 5%. But moves this big are very rare even for VF Corp and that is indicating to us that this news had a significant impact on the market's perception of the business.
The previous big move we wrote about was 5 days ago, when the compstock any dropped 14.3% on the news that the company reported third-quarter results with revenue, operating margin, and EPS, missing analysts' expectations. This underperformance was driven by declines at The North Face ($1.2 billion of revenue vs estimates of $1.3 billion) and Vans ($668 million of revenue vs estimates of $720 million). Management attributed the weakness to multiple factors, including warm weather, tough comps compared to the previous year, underperformance in the Americas, adjustments made to clean up Vans channels, and the impact of a cyber incident at the end of the quarter. Overall, this was a weaker quarter for the company.
VF Corp is down 7.2% since the beginning of the year, and at $17.31 per share it is trading 37.8% below its 52-week high of $27.84 from February 2023. Investors who bought $1,000 worth of VF Corp's shares 5 years ago would now be looking at an investment worth $199.73.
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