With the stock rallying on two activists circling around VFC, we're getting off of this one. Full disclosure, it's at the same price it was when we covered our short and added it long side. But the reality is one of the two activist cases -- cost cuts -- is completely ridiculous. This is a company that lacks brand heat across virtually its entire portfolio. You don't extract capital/spending from a model or 'pull the goalie' on SG&A when you want to reaccelerate the top line. It's like today's ridiculous Old Wall GPS upgrade around cost cuts. Seriously? How about quantifying the credit event that's on the come. But I digress. The other activist case on VFC makes more sense, which is to divest Timberland. Though we'd argue that Timberland is one of the brands worth keeping. It should sell Supreme and Dickies, neither of which belong in the portfolio, and can make a dent in the BIG problem with VFC -- which is the balance sheet. This company isn't looking at a balloon maturity 5-years out, but rather meaningful maturities that come up every year starting in 2024. Asset sales are a must. They won't drive the stock higher, but will simply fund debt service. Regardless, the new CEO has a near impossible job -- driving brand heat while fixing an impaired balance sheet. We simply can't underwrite that long side -- no matter how cheap or beaten down this stock looks. It was built to be cheap. Moving on...
