VF Corp., owner of the North Face, Lee and Wrangler clothing brands, sees change coming to its stable of brands as valuations begin to decline.
Sluggish consumer demand has taken a toll on retail and apparel companies, leading VF to reevaluate what’s not working and what’s missing in its business, Chief Executive Officer Eric Wiseman said in an interview. VF is “likely” to take action to reshape its portfolio this year, he said.
“There are more targets that are more affordable,” Wiseman said. “Valuations were really frothy, and some deserved it and some got dragged along because the sector was doing well. We looked at valuations and said, ‘The company isn’t worth this.’”
The 30 companies in the Russell 3000 Textiles, Apparel & Shoes Index are trading at an average enterprise value of 12.6 times earnings before interest, taxes, depreciation and amortization. That’s down from a one-year high of 14.5 times in October.
VF hasn’t made a major acquisition since it bought shoe company Timberland for about $2.3 billion in 2011. Its last divestiture was in April 2012, when it sold menswear brand John Varvatos Enterprises Inc. VF took its focus off divesting brands, but Wiseman said the company has a responsibility to evaluate whether every brand is making financial and strategic contributions to the business.