The Bracken Darrell Era Starts at VF as Company Looks to Bounce Back
VF Corp. is turning the page with a little candor — and humility.
Bracken Darrell stepped in as president and chief executive officer of the company last week, and while he hasn’t spoken at length publicly about his plans for the parent of Vans, The North Face and Supreme, he did make a quick appearance at the company’s annual meeting of shareholders, held virtually.
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But it was VF’s chair, Richard Carucci, who laid bare just where the company has been and where, he hopes, it’s going.
Carucci detailed the company’s performance last year, noting that it “did not meet our overall expectations as a result of inconsistent execution in a challenging economic environment.”
VF’s revenues rose 3 percent in constant currencies to $11.6 billion last year as adjusted operating income fell 20 percent.
At year-end, the company’s gross leverage came in at 4.7 times earnings before interest, taxes, depreciation and amortization. “This is above our target and as a result of weaker-than-expected operating performance, higher than usual inventory levels at the nearly $900 million cash deposit made as a result of the ongoing Timberland tax dispute,” Carucci said.
He noted the “disappointing operating performance” and that VF’s stock “has lost considerable value” over the past two years. Since July 2021, VF’s stock is down about 77 percent while the broader market, as seen in the S&P 500, has gained just over 3 percent.
“As someone who takes great pride in being a VF board member, it’s humbling for me to report these results,” Carucci said. “They’re not consistent with our rich 124-year history of strong performance and superior returns for shareholders. We must do better, we can do better, and we will do better despite this tough year.”
VF — by virtue of its consistency, its profitability, its powerful balance sheet and its dividend — was long a fashion stock standout, routinely valued at multiples of many competitors, with a market capitalization of more than $30 billion.
But around the beginning of the pandemic, it ceded its top spot and the consistency crown to Lululemon Athletica Inc., and the 2020 deal to buy Supreme did not produce results as quickly as VF hoped. The company is now valued at just $7.6 billion and is struggling to turn around Vans, its largest business.
While it was VF’s about-face that seems to have cost former CEO Steve Rendle his job last year, Carucci assured shareholders of his confidence in Darrell and the company’s more recent steps to improve operations and boost the balance sheet.
“Our goal to strengthen execution across the company includes a game plan to return to supply chain excellence and a greater focus on lowering costs and improving profitability,” the chair said. “We have taken actions to go back to the rigorous planning processes that we know will drive quality customer service, lower inventory levels, and reduce costs. We are leveraging our competitive advantages as a portfolio company by becoming better at sharing talent, best practices, and learnings across our brands and regions.”
New CEOs usually wait a beat and forge connections internally before making any big pronouncements and Darrell’s brief comments were in keeping with that.
“I am super excited to join VF and lead this incredible team of passionate brand builders focused on delivering great apparel and great footwear,” he told shareholders.
Darrell said he plans on building the efforts to stabilize the business over the past six months, with a nod to interim chief Benno Dorer and Carucci in particular.
“I am absolutely committed to continuing the path towards regaining momentum in our business,” Darrell said.
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