V.F. Corporation (VFC) reported a 13% revenue decline to $2.4 billion, missing expectations. Sales were down across the company’s brands, with North Face sales down 5%, Vans 26%, Timberland 14%, and Dickies 15%, with all regions seeing declines, led by a 22% drop in the Americas. Adjusted operating margin fell to -2.1%, with EPS at -$0.32 vs. $0.17 a year ago. On a slightly better note, inventory fell $382 million from Q4, and net debt is down to $5.3 billion. While CEO Bracken Darrell emphasized ongoing turnaround plans and leadership rebuilding, analysts downgraded the stock as the company’s $1.7B in debt maturities could lead to potential asset sales and dividend cuts.
Macy’s (M) fiscal first-quarter sales fell 2.7% year-over-year to $4.8 billion and gross margins declined to 39.2% due to higher markdowns, but adjusted earnings far surpassed consensus EOS of 16 cents, coming in at 27 cents per share. CEO Tony Spring noted that the turnaround plan to enhance profitability and sales growth is focused on improving product, presentation, and customer experience – and it is starting to gain traction. Macy’s raised its full-year guidance, now expecting adjusted earnings between $2.55 to $2.90 per share and net sales of $22.3 billion to $22.9 billion.
Friday, May 24, 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 11 minutes long and covers:
- Initial note
- Introduction – some thoughts on market action this week.
- A quick rundown of the two Turnaround Letter companies that reported this week.
- Comments on recommended companies
- AMMO, Inc. (POWW) announced that the holders of record on May 31 of the Ccmpany’s 8.75% Series A Preferred Stock will receive a cash dividend equal to $0.56 per share. The cash dividend will be paid on June 17.
- Mattel (MAT) announced a multi-year strategic partnership with Outright Games to develop three new games for all consoles and PC slated for release before the end of this year: Matchbox Driving Adventures, Monster High: Skulltimate Secrets, and Barbie Project Friendship.
- Xerox Holdings (XRX) announced today that its board of directors declared a quarterly dividend of $0.25 per share on Xerox Holdings Corporation Common Stock. The dividend is payable on July 31, 2024, to shareholders of record on June 28, 2024.
- Western Union (WU) announced that its board of directors declared a quarterly cash dividend of $0.235 per common share, payable June 28, 2024, to stockholders of record at the close of business on June 14, 2024.
- Nokia Corporation (NOK) announced the successful completion of its acquisition of Fenix Group – a privately held company that specializes in tactical communications solutions for the defense communities – which was originally announced in December 2023.
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 | $ 3.70 | - | Buy (9) |
| Small cap | Duluth Holdings | DLTH | Feb 2020 | 8.68 | $ 4.47 | - | Buy (20) |
| Small cap | Dril-Quip | DRQ | May 2021 | 28.28 | $ 18.22 | - | Buy (44) |
| Small cap | Kopin Corp | KOPN | Aug 2023 | 2.03 | $ 0.83 | - | Buy (5) |
| Small cap | Ammo, Inc. | POWW | Oct 2023 | 1.99 | $ 2.49 | - | Buy (3.50) |
| Mid cap | Mattel | MAT | May 2015 | 28.43 | $ 17.51 | - | Buy (38) |
| Mid cap | Adient plc | ADNT | Oct 2018 | 39.77 | $ 26.85 | - | Buy (55) |
| Mid cap | Xerox Holdings | XRX | Dec 2020 | 21.91 | $ 13.74 | 7.3% | Buy (33) |
| Mid cap | Viatris | VTRS | Feb 2021 | 17.43 | $ 10.45 | 4.6% | Buy (26) |
| Mid cap | TreeHouse Foods | THS | Oct 2021 | 39.43 | $ 35.03 | - | Buy (60) |
| Mid cap | The Western Union Co. | WU | Dec 2021 | 16.40 | $ 12.85 | 7.3% | Buy (25) |
| Mid cap | Brookfield Re | BNRE | Jan 2022 | 61.32 | $ 44.66 | 0.7% | Buy (93) |
| Mid cap | Polaris | PII | Feb 2022 | 105.78 | $ 82.75 | 3.2% | Buy (160) |
| Mid cap | Goodyear Tire & Rubber | GT | Mar 2022 | 16.01 | $ 12.38 | - | Buy (24.50) |
| Mid cap | Janus Henderson Group | JHG | Jun 2022 | 27.17 | $ 34.20 | 4.6% | Buy (67) |
| Mid cap | Six Flags Entertainment | SIX | Dec 2022 | 22.60 | $ 26.12 | - | Buy (35) |
| Mid cap | Kohl’s Corporation | KSS | Mar 2023 | 32.43 | $ 26.41 | 7.6% | Buy (50) |
| Mid cap | Frontier Group Holdings | ULCC | Apr 2023 | 9.49 | $ 5.68 | - | Buy (15) |
| Mid cap | Advance Auto Parts | AAP | Sep 2023 | 64.08 | $ 70.28 | 1.4% | Buy (98) |
| Mid cap | Mohawk Industries | MHK | Jan 2024 | 103.11 | $ 116.43 | - | Buy (165) |
| Mid cap | VF Corporation | VFC | Mar 2024 | 16.24 | $ 12.11 | 3.0% | Buy (25) |
| Mid cap | Barnes Group | B | Apr 2024 | 36.55 | $ 40.80 | 1.6% | Buy (55) |
| Mid cap | First Quantum Minerals | FM | Apr 2024 | 15.93 | $ 18.15 | 1.6% | Buy (40) |
| Large cap | General Electric | GE | Jul 2007 | 304.96 | $ 168.64 | 0.2% | Buy (160) |
| Large cap | Nokia Corporation | NOK | Mar 2015 | 8.02 | $ 3.86 | 3.4% | Buy (12) |
| Large cap | Macy’s | M | Jul 2016 | 33.61 | $ 20.24 | 3.4% | Buy (25) |
| Large cap | Newell Brands | NWL | Jun 2018 | 24.78 | $ 7.85 | 3.4% | Buy (39) |
| Large cap | Vodafone Group plc | VOD | Dec 2018 | 21.24 | 9.32 | 10.9% | Buy (32) |
| Large cap | Berkshire Hathaway | BRK.B | Apr 2020 | 183.18 | $ 406.89 | - | HOLD |
| Large cap | Wells Fargo & Company | WFC | Jun 2020 | 27.22 | $ 59.89 | 2.3% | Buy (64) |
| Large cap | Western Digital Corporation | WDC | Oct 2020 | 38.47 | $ 75.04 | - | Buy (78) |
| Large cap | Elanco Animal Health | ELAN | Apr 2021 | 27.85 | $ 16.67 | - | Buy (44) |
| Large cap | Walgreens Boots Alliance | WBA | Aug 2021 | 46.53 | $ 16.13 | 6.2% | Buy (70) |
| Large cap | Volkswagen AG | VWAGY | Aug 2022 | 19.76 | $ 15.00 | 6.1% | Buy (70) |
| Large cap | Warner Bros Discovery | WBD | Sep 2022 | 13.13 | $ 7.70 | - | Buy (20) |
| Large cap | Capital One Financial | COF | Nov 2022 | 96.25 | $ 138.00 | 1.7% | Buy (150) |
| Large cap | Bayer AG | BAYRY | Feb 2023 | 15.41 | $ 7.53 | 7.2% | Buy (24) |
| Large cap | Tyson Foods | TSN | Jun 2023 | 52.01 | $ 60.04 | 3.3% | Buy (78) |
| Large cap | Agnico Eagle Mines | AEM | Nov 2023 | 49.80 | $ 67.82 | 2.3% | Buy (75) |
| Large cap | Fidelity Natl Info Services | FIS | Dec 2023 | 55.50 | $ 77.29 | 2.7% | Buy (85) |
| Large cap | Baxter International | BAX | Feb 2024 | 38.79 | $ 33.98 | 3.3% | Buy (60) |
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