VF Corp. hosted an investor and analyst meeting last week and discussed major growth opportunities for two of its more established brands in sporting goods, The North Face and Vans.
“These are the number two and number three brands, in terms of revenue at the VF Corporation, and theyve come a long way to be in that position.,” said Eric Wiseman, chairman, president and CEO of VF Corp. He continued, noting that together, the two brands account for 25% of VFCs overall revenues.
Dave Gatto, president of Outdoor Coalition Americas, noted that, “Globally, were almost $2.4 billion in [sales for] 2007 and looking for continued strong growth” for the overall Outdoor Coalition business. He also said that the Coalitions compound annual growth rate (CAGR) from 2003 to 2007 has been well over 20%, which has caused the Coalition to account for an ever increasing portion of overall VFC revenues.
“In 2007, we were 33% of revenues; 2008, 36% of revenues and looking at our five-year growth plan, to be almost 40% of revenues by 2012,” Gatto concluded.
Gatto expects the Outdoor Coalition will hit $1.5 billion in annual revenues by 2012, with a balance between international, retail and domestic.
Looking at The North Face, the brand has added $1 billion to sales since its acquisition by VFC in May 2000, growing at a CAGR of 23%, according to Steve Rendle, president of The North Face. He also said the company has doubled its business since 2004.
The companys European business accounts for 27% of total global sales and has contributed 30% of the brands growth since 2000. The companys Asian business currently accounts for 4% of sales.
Over 72% of TNFs sales growth for the last two years has come from expansion in comp doors.
A major growth initiative for The North Face will be expanding beyond its core roots in outdoor and into the action sports space.
“Well focus on really a multitude of different consumers within action sports — the more traditional alpine and the younger, more aggressive free-ride, youthful consumer,” noted Rendle. “But well also look to take our strength in winter and stretch that across 12 months. In the winter, we speak and sell to a number of outdoor action sports consumers, but in the summer weve typically handed them off to other industries and other brands to service their outdoor needs. We see a great opportunity and we know we have permission to build off of that winter heritage and stretch our relevance into a 12-month action sports brand.”
Currently, 65% of TNFs business is done through the specialty channel, with 50% of those sales coming through outdoor specialty, including the likes of REI.
Outside of specialty, approximately 25% of the brands business is through sporting goods and 10% through department stores. Sporting goods and department stores are expected to increase their share of the companys sales slightly over the next five years. Owned-retail accounts for 14% of TNFs business and is expected to grow to 20% over that period.
Gatto sees TNF doubling sales over the next five years from $1.2 billion to $2.4 billion by 2013. That increase will come on a 15% CAGR through global growth. The European businesses will grow from 27% of total brand sales to 31% and over that five-year period will contribute approximately 34% to 35% of that total growth. The Asia business will double to 8% of sales.
The companys direct-to-consumer business, meanwhile, will grow from 14% of sales to 20% of sales over that period. Finally, each of TNF product categories are expected to see double-digit growth over the next four to five years with sportswear and footwear growing at the fastest rate, eventually representing approximately one-third of TNFs sales.
Over at Vans, company President Steve Murray noted that “we were bought in 2004 and the calendar that Vans operated at that time was a little bit different to VF, but on an annualized basis we were doing about $350 million a year at that time. And since that time weve more than doubled our business.”
Murray broke down the Vans business as 76% of sales from footwear, with apparel growing from 8% of sales four years ago to 18% today. Interestingly, at the time of the acquisition, apparel was given a five-year plan of sales totaling $100 million by 2009, accounting for 20% of overall Vans sales.
“Were not quite at 20% yet, but if you do the math were actually way beyond $100 million,” said Murray.
Classic footwear accounts for approximately 60% of all footwear sales for Vans.
Continuing the breakdown of the business, Murray commented that the Vans business is fairly evenly split between owned-retail, U.S. wholesale and international. International actually grew slightly faster than the U.S., especially in Europe, which now accounts for 25% of the overall Vans business.
Looking ahead, Vans expects to be a $1.2 billion brand by 2013, passing the $1 billion barrier at some point in 2011. The company plans to open approximately 20 stores every year for the next five years in the U.S. with expansion outside of California and the West Coast a main priority.
Wiseman wrapped up his presentation focusing on the overall VFC business.
“We said at the beginning of the year by 2012 we were going to grow VF 8% to 10% a year, compounded over that time period and wed achieve $11 billion of revenue. Were still confident we can do that. We also said we would expand our operating margin from 13.4% in 2007 to 15% in 2012, and we remain confident that we can do that as well.”
