Until this week, VF Corporation’s (VFC) upcoming Kontoor Brand’s spinoff only had the vague timetable of ‘sometime in May’. Finally, we have some closure and some concrete details on the jeanswear company’s upcoming independence.
The board of directors has now formally approved the spinoff which will take place after the close on May 22nd with shareholders expected to receive one Kontoor share for every 7 VFC shares owned. That means a shareholder with 100 shares of VF stock will receive 14 shares of Kontoor stock and a little bit of cash in lieu of a fractional Kontoor share. The new company is expected to trade on the NYSE under the ticker ‘KTB’. For those looking for some early action in the name, a ‘When Issued’ market is expected to begin trading on or about May 9th.
VF Corp also released an investor presentation for Kontoor Brands to get investors’ juices flowing. For the current fiscal year, Kontoor expects revenue to exceed $2.5b and EBITDA between $340-360m. These numbers effectively represent mid-single digit declines versus the most recent year. For 2020-2021 the company’s plans are more ambitious:
- Revenue is expected to increase at a low single-digit compound annual growth rate (CAGR) over the period, which is consistent with the long-term outlook previously provided.
- Adjusted EBITDA* is expected to increase at a mid-single-digit CAGR over the period.
- Capital Expenditures are expected to range between $105 million and $110 million in aggregate over the period, including approximately $80 million to $90 million to support the design and implementation of a global ERP system. Significant efficiencies and cost savings are expected once fully implemented.
As we have previously discussed, VFC’s Kontoor spinoff appears to be a high growth/low growth split and both companies have potential. Levi Strauss(LEVI) has done ok so there is hope here as well. Many other retail companies have since jumped into the spinoff game, but it remains to be seen whether or not the strategy yields fruit (or long term compounded returns) in this industry.
Disclosure: Author holds no position in any stock mentioned.