were edging higher on Monday after a report that the apparel giant might sell its JanSport brand.
A sale would be the latest shake-up for a company that has fallen harder than most in a brutal year for retail as balance sheet questions remain.
Late Friday, Bloomberg reported that
(ticker: VF) was considering selling the well-known backpack brand, citing anonymous sources close to the deal. A potential transaction could value JanSport at roughly half a billion dollars.
VF told Barron’s that the company had “no comment on market rumors or speculation.”
It’s hard to know exactly how much a JanSport sale would move the needle for VF, which owns other brands including The North Face and Timberland. The company doesn’t break out sales for JanSport, which is one of half a dozen brands clumped together in its active segment, its largest by revenue for the past four years.
Still a little extra money on hand likely wouldn’t go amiss. VF’s cash ratio has fallen to 0.38 in its most recent fiscal year according to FactSet, to its lowest point since fiscal 2019. Analysts expect free cash flow to slip this year to its lowest point since 2017.
Indeed, Cowen’s John Kernan recently noted that there are questions about “the durability of the dividend into next year in the face of $1.8 billion debt refinancing.” Currently the shares yield 7.7%.
That’s climbed as the shares have tumbled nearly two-thirds since the start of the year, most recently crumbling earlier this month when VF slashed its full-year outlook and announced its CEO’s departure—one of many retail chief executive departures during the industry’s rout.
Even by retail standards however, VF’s performance has been disappointing. The stock’s 64% decline is nearly double the 33% year-to-date fall in the
SPDR S&P Retail
So while it’s impossible to do much without any details, rumors that it’s considering selling JanSport could lend credence to those who think it needs a cash infusion. Still, if it fetches a high enough price that could allay some fears.
Ultimately however, shareholders may welcome a move, given VF’s difficult 2022, and nor does parting with JanSport seem particularly painful.
“The last time management discussed the performance of JanSport on an EPS call was more than 7 years ago, so it would seem the brand isn’t core to the strategy,” notes Wedbush analyst Tom Nikic. “Between rising interest rates, the debt raised to finance the Supreme deal, and the company’s recent financial choppiness, they would presumably have to refinance [debt ] at a much higher interest rate, so they might prefer to divest some non-core assets to raise cash to help pay off the notes at maturity (rather than refinancing the full amount).”
VF paid about $2.1 billion for streetwear brand Supreme in late 2020.
That said, by his math JanSport alone couldn’t command a $500 million price tag; rather the company may have to sell other noncore active brands as well.
In other words, investors would have to get comfortable with a very different brand portfolio for VF.
Write to Teresa Rivas at email@example.com