At its annual investor day held in Boston on Thursday, VF Corp. said it expected revenue to grow at a compounded annual growth rate (CAGR) of 4 to 6 percent over the next five years, through 2021. Hyper-growth online at both its DTC (direct to consumer) and wholesale accounts, continued momentum with Vans and outsized expansion overseas, especially in China, are being counted on to reach its growth goals.

Among its major brands, Vans is expected to show a CAGR of 8 to 10 percent from 2016 to 2021. That compares to 6 to 8 percent for The North Face and 4 to 6 percent for Timberland.

By channel, digital is expected to vault to represent 16 percent of VF’s overall sales by 2021, more than double the 7 percent reached in 2016. In 2012, online accounted for only 3 percent of sales. On a five-year CAGR, DTC (digital) is expected to grow in the range of 24 to 26 percent.

Store expansion will slow versus recent years with CAGR for DTC (stores) set at 3 to 5 percent through 2021. Wholesale, by far its most mature channel, is expected to expand 2 to 4 percent on average.

International is also projected to be an outsized growth driver for the company, although some regions will see stronger growth than others. Overall, international is expected to expand at a 7 to 9 percent average pace from 2016 to 2021. The gains will be led by Asia, expected to show a five-year CAGR in the range of 9 to 11 percent; followed by non-U.S. Americas, 8 percent to 10 percent; and Europe, 4 to 6 percent. In the U.S., overall growth is expected at 2 to 4 percent on average over the next five years.

Among its brands, Vans is expected to see the strongest five-year growth rate in APAC, up 17 to 19 percent on average; followed by non-U.S. Americas, 12 to 14 percent; EMEA, 6 to 8 percent; and the U.S., 5 to 7 percent. China is expected to contribute 11 percent of Vans’ revenue by 2021, up from 7 percent in 2016 and 3 percent in 2012.

By channel, Vans is expected to see DTC (digital) sales jump 28 to 30 percent on a CAGR basis over the next five years. DTC (stores) is expected to expand 8 to 10 percent on average, and wholesale, 3 to 5 percent. Overall, digital is expected to represent 17 percent of Vans’ revenue by 2021, up from 7 percent in 2016 and 3 percent in 2012.

Among categories, the fastest CAGR growth at Vans is seen in Apparel & Other, 13 to 15 percent; and Progression Footwear, 12 to 14 percent. Heritage Footwear for Vans is expected to see a CAGR of 3 to 5 percent over the next five years.

In 2016, the U.S. accounted for 55 percent of Vans’ sales; EMEA, 22 percent; APAC, 13 percent; and non-U.S. Americas, 10 percent. Wholesale was the biggest channel, 52 percent; followed by DTC (stores), 41 percent; and DTC (digital), 7 percent. Heritage product made up 55 percent of product versus 24 percent for Progression and 21 percent for Apparel & Other.

The North Face similarly is expected to find its fastest regional growth over the next five years in APAC, up 8 to 10 percent on a CAGR basis. That’s followed by EMEA and non-U.S. Americas, both at 7 to 9 percent; and the U.S., 4 to 6 percent.

Growth is expected to be driven by the emerging categories within its “consumer territories” positioning introduced last year. The highest five-year CAGR is expected from Mountain Athletics, its training category, 11 to 13 percent; followed by Urban Exploration, 9 to 11 percent; and Mountain Lifestyle, 8 to 10 percent. Its core Mountain Sports area is expected to grow at a CAGR of 4 to 6 percent.

Again similar to Vans, DTC (digital) is expected by lead the way among channels for The North Face with a five-year CAGR of 18 to 20 percent. DTC (stores) is expected to expand at a 7 to 9 percent rate on average while wholesale is expected to grow 2 to 4 percent on average.

In 2016, Mountain Sports accounted for 61 percent of The North Face’s sales; Mountain Lifestyle, 19 percent; Urban Exploration, 13 percent; and Mountain Athletic, 7 percent. The U.S. was by far its largest market at 63 percent, followed by EMEA, 22 percent; APAC, 10 percent; and non-U.S. Americas, 5 percent. Wholesale made up 62 percent of The North Face’s sales versus 29 percent for DTC (stores), and 9 percent for DTC (digital).

At Timberland, the top gains regionally are expected from non-U.S. Americas, expected to grow at an 8 to 10 percent CAGR from 2016 to 2021. APAC is expected to generate annual five-year growth in the range of 6 to 8 percent; EMEA, 4 to 6 percent; and U.S., 3 to 5 percent.

By channel, sales for Timberland are expected to grow over the next 5 years at a CAGR of 2 to 4 percent at wholesale, 3 to 5 percent at DTC (stores), and 23 to 35 percent at DTC (digital). By category, Men’s is expected to grow at a CAGR from 2016 to 2021 of 3 to 5 percent; Women’s, 6 to 8 percent; and Apparel & Other, 6 to 8 percent.

In 2016, the U.S. accounted for 42 percent of Timberland’s sales, followed by EMEA, 37 percent; APAC, 16 percent; and non-U.S. Americas, 5 percent. Wholesale made up 69 percent of sales versus 26 percent for DTC (stores), and 5 percent for DTC (digital). Men’s made up 57 percent of sales versus only 15 percent for Women’s and 28 percent for Apparel & Other.

Among its other major segments, five-year CAGR growth of 1 to 3 percent is expected for Jeanswear (Wrangler, Lee) and 4 to 6 percent for Workwear (Red Kap, Timberland Pro, Bulwark, Wrangler Riggs)

Overall, according to its presentation, the sale gains are expected to be more moderate during a “reshape” period in 2017-2018 period, but then expand at a faster rate in over the 2018-2019 period and accelerate in the 2019-to-2021 period.

The overall bullish outlook on digital comes as revenues have grown at a 29 percent CAGR from $200 million in 2012 to $600 million in 2016. By region, digital expanded at a 197 percent CAGR over those four years in the APAC region, 46 percent in the EMEA region, and 17 percent in the Americas. At the close of 2016, the Americas accounted for 61 percent of digital sales; APAC, 20 percent; and EMEA, 19 percent.

Looking ahead, the Americas are expected to see growth in digital sales at a CAGR of 20 to 22 percent. The same EMEA rate is pegged at 22 to 24 percent and APAC, 35 to 37 percent. By 2021, digital is expected to account for 30 percent of VF’s DTC sales in the Americas versus stores, 70 percent. EMEA will see a similar mix, with digital making up 31 percent of sales. In Asia, however, digital and stores are each expected to make up half of sales.

Wholesale is expected to see a channel shift aligned with expected greater sales to online wholesale accounts as well as the ongoing weaker traffic and store closings seen at brick & mortar stores. The share of sales coming for mid-tier and traditional department stores is expected to drop to 8 percent of wholesale sales by 2021 from 12 percent in 2016. Specialty/other is expected to decline to 28 percent of wholesale sales from 32 percent. Mass is being targeted at 14 percent, down from 15 percent. By comparison, digital will expand to account for 14 percent of wholesale sales by 2021, up more than double from 6 percent in 2016. International is expected to contribute 36 percent of wholesale sales, up from 35 percent in 2016.

Internationally, big growth is set for China, which is expected to account for 54 percent of sales in the Asia region by 2021, up from 48 percent in 2016. Vans is expected to expand to account for 33 percent of the company’s sales in Asia, up from only 24 percent in 2016. Kevin Bailey, who used to run Vans, is now heading the Asia Pacific region. Among other regions, growth overall in the EMEA region is expected to be led by the U.K. and Italy while Mexico is expected to outpace the non-U.S. Americas growth rate.

Other projections:

  • Gross margin is expected to reach 51.5 percent in 2021, up from 48.6 percent on an adjusted basis for 2016.
  • Operating margin is expected to reach 16 percent in 2021 versus 14 percent in 2016.
  • Earnings per share is expected to grow at a five-year CAGR of between 10 percent and 12 percent. The international earnings CAGR is expected between 11 percent and 13 percent, and domestic, 6 to 8 percent.
  • The company expects to generate more than $9 billion of cash from operations on a cumulative basis between 2017 and 2021 and return $8 billion to shareholders through dividends and share repurchases.
  • VF expects to deliver annual total shareholder return (TSR) in the 13 percent to 15 percent range as the company continues to target top quartile TSR performance.

Photo courtesy VF Corp.