V.F. Corporation (VFC) announced the sale of Supreme, the famed streetwear brand, to EssilorLuxottica, the owner of Ray-Ban, for $1.5 billion, leading to a 13.6% surge in VFC’s shares on Wednesday. Supreme, a New York City skate shop turned global fashion icon since 1994, became renowned for its exclusive collaborations with luxury brands like Louis Vuitton and Nike. VFC acquired Supreme in 2020 for $2.1B, hoping to leverage its trendy image to boost its portfolio. However, the huge debt load and miserable margins took their toll, and by last year the company had written down two-thirds of Supreme’s value.
This is a great development, and in line with the company’s “Reinvent” turnaround plan, as it offloads the debt and allows VFC to cut losses and refocus on the blocking/tackling of generating free cash flow with its core brands. More importantly for us, it pulls share prices back up above our initial entry, with a clear bottom in the rear view mirror and the ability to let earnings do the talking for the stock from here.
Macy’s (M) terminated discussions with an investor group comprising Arkhouse Management and Brigade Capital regarding a potential buyout, citing a “lack of compelling value.” The company will now shift its full focus to executing its “A Bold New Chapter” turnaround strategy, which includes store closures, job cuts, and a renewed emphasis on its luxury brands.
To be fair, $25 per share wasn’t really a serious offer to begin with, but I do suspect a real estate play could happen here. Rather than a broad sale I would expect more incremental sales of 10, maybe 20 of the prime real estate annually as opposed to a mass sale of a large portfolio of mall-based properties.
RATINGS CHANGE:
This exercise did get me thinking about our position in Kohl’s (KSS), however … more specifically how their real estate is worth nowhere near that of Macy’s. I’ve had my doubts for a while, but this excuse to dig into the holdings and model the steady decline in the overall business has convinced me this stock is just a melting ice cube.
As such, I’m cutting it here, and moving it to SELL.
Friday, July 19, 2024, Subscribers-Only Podcast:
Covering recent news and analysis for our portfolio companies and other topics relevant to value/contrarian investors.
Today’s podcast is about 7 minutes long and covers:
- Initial note
- M&A divestitures, ratings changes, and the comments below.
- Comments on recommended companies
- Gannett (GCI) announced today that it will release its second-quarter 2024 financial results on Thursday, August 1, 2024, prior to the open.
- Adient (ADNT) will host a conference call before the open on August 6, 2024, to discuss its third-quarter fiscal 2024 financial results.
- Western Union (WU) announced they will host a webcast and conference call to discuss second-quarter 2024 results after the close on July 30.
- Brookfield Reinsurance (BNRE) announced its upcoming annual general and special meeting of shareholders will be held via webcast on July 22, 2024, at 10:30 a.m. (ET).
- Six Flags (FUN) will announce 2024 second-quarter Pre-Merger Results on Thursday, August 8.
- Barnes Group Inc. (B) declared a quarterly cash dividend of 16 cents ($0.16) per share, payable September 10, 2024, to shareholders of record at the close of business on August 22, 2024.
- Newell Brands (NWL) announced its second-quarter 2024 earnings results will be released Friday, July 26, 2024, prior to market open and will be followed by a live webcast at 9:30 a.m. ET.
- Warner Brothers Discovery (WBD) announced that it will report its second-quarter 2024 results on Wednesday, August 7, 2024, after the market closes.
- Fidelity Natl Info Services (FIS) will announce second-quarter 2024 financial results on Tuesday, August 6, 2024, prior to market open.
- Baxter International (BAX) will host a conference call to discuss its second-quarter 2024 financial results on Tuesday, August 6, 2024, at 7:30 a.m. CT.
Please know that while I don’t yet personally own shares of all Cabot Turnaround Letter recommended stocks – including the stocks mentioned in this note – that will materially change over time.
Please feel free to share your ideas and suggestions for the podcast and the letter with an email to either me at mwarder@cabotwealth.com or to our friendly customer support team at support@cabotwealth.com. Due to the time and space limits, we may not be able to cover every topic, but we will work to cover as much as possible or respond by email.
Portfolio
| Market Cap | Recommendation | Symbol | Rec. Issue | Price at Rec. | Current Price * | Current Yield | Rating and Price Target |
| Small cap | Gannett Company | GCI | Aug 2017 | 9.22 | $ 4.74 | - | Buy (9) |
| Small cap | Duluth Holdings | DLTH | Feb 2020 | 8.68 | $ 3.80 | - | Buy (20) |
| Small cap | Dril-Quip | DRQ | May 2021 | 28.28 | $ 17.24 | - | Buy (44) |
| Small cap | Kopin Corp | KOPN | Aug 2023 | 2.03 | $ 1.09 | - | Buy (5) |
| Small cap | Ammo, Inc. | POWW | Oct 2023 | 1.99 | $ 1.71 | - | Buy (3.50) |
| Mid cap | Mattel | MAT | May 2015 | 28.43 | $ 16.34 | - | Buy (38) |
| Mid cap | Adient plc | ADNT | Oct 2018 | 39.77 | $ 23.98 | - | Buy (55) |
| Mid cap | Xerox Holdings | XRX | Dec 2020 | 21.91 | $ 11.90 | 8.4% | Buy (33) |
| Mid cap | Viatris | VTRS | Feb 2021 | 17.43 | $ 11.70 | 4.1% | Buy (26) |
| Mid cap | TreeHouse Foods | THS | Oct 2021 | 39.43 | $ 37.64 | - | Buy (60) |
| Mid cap | The Western Union Co. | WU | Dec 2021 | 16.40 | $ 12.42 | 7.6% | Buy (25) |
| Mid cap | Brookfield Reinsurance | BNRE | Jan 2022 | 61.32 | $ 46.20 | 0.7% | Buy (93) |
| Mid cap | Polaris | PII | Feb 2022 | 105.78 | $ 82.66 | 3.2% | Buy (160) |
| Mid cap | Goodyear Tire & Rubber | GT | Mar 2022 | 16.01 | $ 12.05 | - | Buy (24.50) |
| Mid cap | Janus Henderson Group | JHG | Jun 2022 | 27.17 | $ 35.33 | 4.4% | Buy (67) |
| Mid cap | Six Flags Entertainment | FUN | Dec 2022 | 38.62 | $ 50.85 | - | Buy (60) |
| Mid cap | Kohl’s Corporation | KSS | Mar 2023 | 32.43 | $ 21.43 | 9.3% | Buy (50) |
| Mid cap | Frontier Group Holdings | ULCC | Apr 2023 | 9.49 | $ 3.57 | - | Buy (15) |
| Mid cap | Advance Auto Parts | AAP | Sep 2023 | 64.08 | $ 59.87 | 1.7% | Buy (98) |
| Mid cap | Mohawk Industries | MHK | Jan 2024 | 103.11 | $ 128.69 | - | Buy (165) |
| Mid cap | VF Corporation | VFC | Mar 2024 | 16.24 | $ 16.30 | 2.2% | Buy (25) |
| Mid cap | Barnes Group | B | Apr 2024 | 36.55 | $ 42.30 | 1.6% | Buy (55) |
| Mid cap | First Quantum Minerals | FM | Apr 2024 | 15.93 | $ 16.26 | 1.6% | Buy (40) |
| Mid cap | United States Steel | X | Jun 2024 | 37.12 | $ 37.61 | 0.5% | Buy (55) |
| Mid cap | Foot Locker | FL | Jul 2024 | 26.56 | $ 25.05 | 0.0% | Buy (55) |
| Large cap | General Electric | GE | Jul 2007 | 304.96 | $ 159.47 | 0.2% | Buy (160) |
| Large cap | Nokia Corporation | NOK | Mar 2015 | 8.02 | $ 3.67 | 3.4% | Buy (12) |
| Large cap | Macy’s | M | Jul 2016 | 33.61 | $ 16.53 | 3.4% | Buy (25) |
| Large cap | Newell Brands | NWL | Jun 2018 | 24.78 | $ 6.32 | 3.4% | Buy (39) |
| Large cap | Vodafone Group plc | VOD | Dec 2018 | 21.24 | 9.07 | 11.3% | Buy (32) |
| Large cap | Berkshire Hathaway | BRK.B | Apr 2020 | 183.18 | $ 435.15 | - | HOLD |
| Large cap | Western Digital Corporation | WDC | Oct 2020 | 38.47 | $ 70.26 | - | HOLD (78) |
| Large cap | Elanco Animal Health | ELAN | Apr 2021 | 27.85 | $ 12.73 | - | Buy (44) |
| Large cap | Walgreens Boots Alliance | WBA | Aug 2021 | 46.53 | $ 11.06 | 9.0% | Buy (70) |
| Large cap | Volkswagen AG | VWAGY | Aug 2022 | 19.76 | $ 12.05 | 7.6% | Buy (70) |
| Large cap | Warner Bros Discovery | WBD | Sep 2022 | 13.13 | $ 8.63 | - | Buy (20) |
| Large cap | Bayer AG | BAYRY | Feb 2023 | 15.41 | $ 7.09 | 7.6% | Buy (24) |
| Large cap | Tyson Foods | TSN | Jun 2023 | 52.01 | $ 59.28 | 3.3% | Buy (78) |
| Large cap | Agnico Eagle Mines | AEM | Nov 2023 | 49.80 | $ 74.47 | 2.3% | HOLD (75) |
| Large cap | Fidelity Natl Info Services | FIS | Dec 2023 | 55.50 | $ 75.16 | 2.7% | Buy (85) |
| Large cap | Baxter International | BAX | Feb 2024 | 38.79 | $ 35.35 | 3.3% | Buy (60) |
Copyright © 2024. All rights reserved. Copying or electronic transmission of this information without permission is a violation of copyright law. For the protection of our subscribers, copyright violations will result in immediate termination of all subscriptions without refund. Disclosures: Cabot Wealth Network exists to serve you, our readers. We derive 100% of our revenue, or close to it, from selling subscriptions to our publications. Neither Cabot Wealth Network nor our employees are compensated in any way by the companies whose stocks we recommend or providers of associated financial services. Employees of Cabot Wealth Network may own some of the stocks recommended by our advisory services. Disclaimer: Sources of information are believed to be reliable but they are not guaranteed to be complete or error-free. Recommendations, opinions or suggestions are given with the understanding that subscribers acting on information assume all risks involved. Buy/Sell Recommendations: are made in regular issues, updates, or alerts by email and on the private subscriber website. Subscribers agree to adhere to all terms and conditions which can be found on CabotWealth.com and are subject to change. Violations will result in termination of all subscriptions without refund in addition to any civil and criminal penalties available under the law.
