What Was Up With VF Corp.’s Options Volume Yesterday?

Wednesday was not a good day for stocks. The S&P 500 lost 1.6% on the day, while the Nasdaq Composite was off by 2.2%.  

Investors didn’t like the comments from Federal Reserve chair Jerome Powell about interest rates. Nor were they very receptive to Google’s lower-than-expected ad revenues and margins. 

Unrelated to tech stocks, VF Corp. (VFC) had its busiest day in the options market since Nov. 1. Its options volume was 43,764, nearly 3x its 30-day average. As for unusual options activity, the apparel conglomerate had two calls and four puts with volume-to-open-interest of 1.25 or higher, including four with Vol/OI ratios of 10x or higher. 

Something’s going on with VFC stock; I’m unsure what. Let’s consider the possibilities. 

A Ransomware Attack?

Bracken Darrell has been CEO of VF since July. The former CEO of Logitech (LOGI) had to spend the last six months trying to fix everything wrong with the apparel conglomerate. That’s a task he’s up to. 

I wrote last October about Logitech generating a 681% cumulative return in the 10.5 years he was CEO of the tech accessories company. I likened him to an apparel industry version of Hubert Joly at Best Buy (BBY).

But in mid-January, VF announced further information about a significant ransomware attack it faced in December that is said to have resulted in the lost data of more than 35 million users.   

“Based on VF’s preliminary analysis from its ongoing investigation, VF currently estimates that the threat actor stole personal data of approximately 35.5 million individual consumers,” the company wrote in its Jan. 18 filing with the SEC. 

“However, VF does not collect or retain in its IT systems any consumer social security numbers, bank account information or payment card information as part of its direct-to-consumer practices, and, while the investigation remains ongoing, VF has not detected any evidence to date that any consumer passwords were acquired by the threat actor.”

So, that doesn’t seem like a catalyst for the action. 

The only other SEC filings in 2024 either involve phantom stock units for company directors that vest on their retirement from the board or revised State Street and BlackRock ownership positions. 

Both of these are mundane and very standard filings. There’s nothing to read here.

What About Layoffs?

In early December, the company laid off approximately 500 employees as part of its ongoing restructuring of its business.

In my October article, I talked about Engaged Capital, the activist investor who’s built a  significant stake in the company and is looking for VF to implement a $300 million cost-cutting plan. 

Darrell’s on record suggesting nothing is off the table as he and his management team work to right the company. The job won’t be finished by the end of 2024. Investors were already made aware by the CEO that the company’s turnaround efforts would not be completed in the near term. Only a multi-year, focused effort would get VF on its feet again. 

As The Motley Fool discussed in late November, Darrell may be forced to unload one or more of its seemingly untouchable core brands.

“While it is impossible to predict the future when it comes to brand sales, it seems very clear that the new CEO was alluding to such changes in his prepared comments. He added that the ‘board and I are fully aligned,’ which suggests that the board is likely to go along with big portfolio changes if they do come about,” The Motley Fool wrote on Nov. 30.

Investors may sense that the significant changes in store could be the sale of Timberland or even Vans, along with the remaining smaller brands. 

The only untouchable, if there is such a thing, would be The North Face. Its business continues to grow profitably despite its stablemates’ troubles. As the Fool alluded, VF could become The North Face soon. 

But that’s only conjecture. 

The Unusual Options Activity Itself

As I said, Wednesday had six options with a 1.25 Vol/OI ratio or higher. Four were puts and two calls. 

What jumps out to me is the Feb. 16 $19 call. With 15 days to expiration, it had a Vol/OI ratio of 54.56, putting it sixth amongst Wednesday’s 1,070 unusually active options. The ask was $0.29, a down payment of just 1.5%. As I write this Thursday in early afternoon trading, the $19 call has a volume of just 200, well off the 12,276 yesterday. The ask price hasn’t budged. 

As I look at yesterday’s trading of the $19 call, I see trade sizes of 6,000, 2,000, and 1,990, executed between 10:23 and 11:10 in the morning. It could be nothing or someone looking for a big move before or after VF announces earnings on Feb. 6. 

They’re going to be awful. We know that. It’s possible, however, that the steps taken by Darrell are more considerable than anyone imagines. What they could be beyond personnel cuts and brand divestitures is beyond my pay grade. 

My only thought is that the company announces spinning off The North Face into its own independent, publicly traded company while working to rehab the rest of the business. 

I guess we’ll see next Tuesday.    

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