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January 21, 2019

US government shutdown threatens to delay VF Corp spin-off

By Hannah Abdulla

The ongoing US government shutdown is threatening to delay VF Corp’s planned spin-off of its jeans division, CFO Scott Roe told an audience of investors in the wake of the company’s Q3 results.

The company is to rename its jeanswear business Kontoor Brands Inc following the planned spin-off of the unit, enabling VF to sharpen its focus as a global clothing and footwear powerhouse focused on brands such as The North Face, Timberland and Vans. 

The separation was due to be completed in the first half of 2019, and the new independent, publicly traded company will comprise the Wrangler, Lee and Rock & Republic brands, and the VF Outlet business.

But Roe said on Friday (18 January) that could potentially change with the US embroiled in a government shutdown.

A government shutdown is when when Congress fails to appropriate funds, forcing non-essential discretionary federal programmes close. In the normal budget process, Congress appropriates funds by 30 September for the following fiscal year. When that doesn’t happen, it enacts a continuing funding resolution, and if Congress is unable to agree on that, it forces a shutdown, signalling a complete breakdown in the budget process. The current US shutdown began on 21 December.

“We remain on track for a public filing in early March. However, the government shutdown has the potential to delay the public filing,” said Roe. “We will keep you posted as our timeline evolves. Both VF or RemainCo and Kontoor Brands will host investor roadshows in the company months leading up to our anticipated separation date at the end of April.”

Meanwhile, some other apparel brands have voiced their opinions over the shutdown.

Columbia Sportswear, whose business is centred on outdoor-wear, took out its first-ever political ad. CEO Tim Boyle told Closing Bell it wasn’t politically motivated, but about “protecting the assets that we have invested in so heavily as a country.”

As has already been reported on just-style, the ongoing US government shutdown is also depriving apparel and textile industry executives of key trade and economic data – at a time when trade tensions between the US and China mean that having access to the most up-to-date statistics is more important than ever: From Field to Shelf – The trade data casualties of Trump’s border wall.

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