Steve Rendle Exits VF Corp. With Vans Woes, Supreme Debt Bearing Down
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For the usually rock solid VF Corp., Steve Rendle’s surprise departure on Monday as president, chairman and chief executive officer counts as a corporate earthquake.
But it’s one that has been rumbling for a while.
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While VF spent years as a canny brand operator with the logistical savvy and scale to navigate both good and bad times, the company has been showing signs of increasing stress.
Its biggest and most profitable brand, Vans, is in the midst of a turnaround that has yet to bear financial fruit.
VF cut its annual adjusted earnings outlook four times this year, going down to $2 to $2.20 a share on Monday from the $3.30 to $3.40 projected in May, with revenue getting downgraded to a 3 percent to 4 percent gain in constant dollars from a better than 7 percent increase.
The $2.1 billion Supreme acquisition added debt to the balance sheet, contributing to worries around the company’s dividend.
Now, Rendle, 63, has retired “by mutual agreement with the board,” according to a filing with the Securities and Exchange Commission. The change was “effective immediately.”
The company has no permanent successor lined up — a very unusual look from VF, which is known for grooming talent and for well-coordinated CEO handovers.
In short, VF is acting very un-VF like. And Wall Street doesn’t approve.
Shares of the company fell 11.2 percent to $29.51 on Monday, leaving it with a market capitalization of $11.5 billion. The stock is down more than 50 percent over the past year and is trading well below the nearly $100 it was worth at the end of 2019.
“The last couple of years have been really challenging,” said Tom Nikic, an analyst covering VF for Wedbush Securities Inc. “[Rendle] stepped into the CEO role right when Vans was the hottest brand in the world and they were just flying high and everything was going great. Now you’ve had this situation where the recovery from COVID-19 has been far softer than they expected.
“Steve came up through The North Face and he was a North Face guy, it’s probably not a surprise that North Face is the best-performing brand in the portfolio right now,” Nikic said. “But Vans is the biggest brand. As Vans goes, this company goes, this stock goes.”
The analyst described Timberland as a “roller coaster” and said investors aren’t seeing the kind of consistency in VF that they’re used to.
And the company’s latest addition might have left it in something of a tough spot.
“The Supreme acquisition probably hasn’t worked out the way they thought,” Nikic said. “They had to put a lot of debt on the balance sheet to fund the Supreme acquisition. Right now they’re probably rueing that. That’s one move they wish they could take back would be my guess. They paid [more than] $2 billion for a brand that generates $500 million in revenue.”
(VF has also been lauded for not forcing the scarcity-dependent Supreme to be more commercial, keeping the brand purer as it grows into its potential, but that might not come soon enough to help the firm out of its current jam.)
Nikic noted that with $5.5 billion of net debt and a $876 million tax payment tied to the Timberland acquisition, VF’s dividend could be at risk unless the company refinances at less-favorable terms next year.
That leaves VF with a tricky stretch ahead.
Lead independent director Benno Dorer, 58, on Monday was named interim president and CEO, putting the company in the hands of a consumer products veteran who was CEO of Clorox for six years and is now a senior adviser with private equity giant KKR & Co. Inc. Richard Carucci, VF director and former Yum! Brands Inc. executive, will serve as interim chairman of the board.
A search is underway for a permanent CEO and the company said internal and external candidates will be evaluated.
The company said Rendle would forfeit his 2022 equity awards and not be eligible for a bonus this fiscal year. He will, however, receive his base salary for one year while subject to a non-compete agreement. Rendle was routinely among the highest-paid CEOs in fashion. In fiscal 2022, he received a salary of $1.4 million and incentive pay of $3.2 million and was set to receive stock and option awards valued at more than $10 million.
It could be a tough spot to fill — and there are other big companies looking for a new CEO, including Under Armour Inc., Gap Inc. and Kohl’s Corp. after that retailer’s CEO, Michelle Gass, revealed plans to decamp to Levi Strauss & Co., where she eventually will succeed its CEO Chip Bergh.
Surely there would be plenty of takers for the top job at VF, but there are fewer contenders today with a fashion background, international experience and practice running a large multibrand portfolio.
“Complexity as well as change in hyper drive has severely affected those in the C-suite as we have seen with the exit of Michele Gass from Kohl’s and now Steve Rendle from VF,” said Elaine Hughes, CEO of executive search firm E.A. Hughes, a division of Solomon Page.
For VF, Hughes said: “Multibrand navigation is critical and unfortunately there are mostly executives with single brand responsibility with the exception of cosmetics. The [consumer packaged goods] industry could possibly deliver some interesting candidates as Ralph Lauren Corp. has seen with the hire of Patrice Louvet, and Gina Boswell at Bath & Body Works. Another trend is the boomerang executive, not just Bob Iger returning to Disney, but Mary Dillon at Foot Locker and Ken Hicks at Academy.”
For now, it’s up to Dorer.
“The board thanks Steve for his many contributions and leadership during his nearly six years as CEO and nearly 25 years with VF,” Dorer said. “Steve’s commitment to the business, passion for building strong brands and focus on culture have helped VF evolve our portfolio of strong active-lifestyle brands and establish VF as a purpose-led company. We wish Steve well in his future endeavors.
“VF has iconic brands in attractive growth categories, deep relationships with consumers and customers, and significant competitive advantages as a portfolio company,” the interim CEO said. “I look forward to working closely with the board and VF’s executive leadership team to drive profitable growth across our portfolio while the board identifies the right leader for the company’s next chapter.”
The last chapter was certainly a busy one.
Rendle moved the company’s headquarters to Denver, spun off Lee and Wrangler into Kontoor Brands Inc. to focus on the outdoor space, navigated the pandemic and bought Supreme.
“It has been an honor to lead VF as CEO over the last five years,” Rendle said. “I depart with the deepest gratitude for the extremely talented and dedicated global team at VF. I remain as confident as ever in VF’s tremendous potential and look forward to watching the company’s continued success.”
