The North Face Looks to Existing Dealers to Help Double Sales by 2015

International revenues are expected to grow at a 20% annual rate, which will reduce the share of sales derived from the U.S. to 65% by 2015 from 69% today.

Steve Rendle, president of VF's Outdoor Americas Coalition and TNF emphasized the growth will be built on the brand’s 40-year heritage and commitment to premium and technical outdoor gear.

To underline the point, Rendle trotted out three of the brand’s star athletes – Conrad Anker, Jimmy Chin and Kit DesLauriers – to schmooze investors at VF Corp.’s annual investor day.

The presentation was unusual in that it was dedicated entirely to TNF, which CEO Eric Wiseman called “one of the most impressive growth and brand stories in the apparel industry over the last decade.” The brand has grown fivefold to $1.4 billion in annual sales and now accounts for 40% of sales at VF Corp., which was trading at a 52-week high last week. Despite that growth, TNF still trails behind Nike, Adidas, Puma, Asics and Reebok with just 1% of global retail sales of the apparel and footwear products it sells.

 

Strategies to deliver $1.6 billion in revenue growth over the next five years include:

Reach New Consumers: TNF expects its Outdoor business will double in size, but shrink to 72% of global sales from 81% as its Performance and Action Sports businesses grow faster. The Performance business – running, training and yoga – will quintuple to about $220 million in annual sales, or from 3% to 8% of global revenue. Action Sports sales will more than triple to $400 million, or from 9% to 13% of sales. Much of the growth will come from luring youth off the pistes to freeride skiing in the backcountry and expanding TNF’s offerings in mountain biking. TNF expects its Youth business to double, but remain about 7% of sales. TNF owned stores will help grow the Performance and Action Sports businesses by carrying a relatively high proportion of those products. It will grow its Youth business by expanding its selection of apparel for infants and toddlers.

Wholesale Distribution: TNF sees 75% of its growth in the next five years coming from its existing dealers, but also expects to grow its wholesale doors from 6,000 to 10,000 of the estimated 18,000 doors selling outdoor product in the United States. Most of that growth will come from opening new doors in the Other Specialty Channel, which caters to runners, mountain bikers, skiers and snowboarders. Today, about 40% of TNF’s doors are in that channel, 30% is in the Outdoor Specialty, 23% is in Sporting Goods and 5% is department stores. The company thinks Other Specialty Channels will account for 47% of its doors by 2015. TNF’s new cycling apparel line will help grow sales at REI, while its growing presence in running will boost sales at Dick’s Sporting Goods, The Sports Authority and their regional competitors, said Todd Spaletto, VP of sales America. Five of the top 10 selling TNF items sold in the SA Elite store that opened recently in Denver’s Cherry Creek store came from TNF’s Performance line.  “To me, that shows the permission that we have in the performance category with a strong competitive set in a very active community,” he said. Spaletto said he thinks TNF can nearly triple its number of shop-in-shops to 2,000.
Boost Spending on Marketing: TNF expects to boost its spending on marketing 45% in 2010 and make more than 1.8 billion media impression in the United States alone. This will include sponsorship of more than 70 athletes and myriads events and expeditions across the globe. The company expects 1,500 TV spots it is running this winter focusing on its snow sports products and growing presence at the 2011 Winter X Games will generate 175 million impressions – a 700% increase from a year ago. To drive traffic to its wholesale partners, TNF is plugging top dealers in advertising it is running in 12 U.S. markets – a tactic that has driven a “huge increase in traffic and awareness.”

Expand Direct Business: TNF’s direct business will grow to 23% from 19% of global revenues as it continues to open retail stores and e-commerce initiatives to drive home the message that it’s gone beyond outerwear to running, yoga and action sports. The company plans to grow its store count from 57 to 194 full-price stores and from 133 to 184 partnerships stores in the next five years, with most of that growth coming from overseas. “We utilize these channels to reinforce our premium price position,” said Lindsay Rice, VF for direct-to-consumer. “We're a full price brand. We don't discount. And, we utilize these channels to showcase that. In our retail stores, we merchandise our full price retail stores from the middle of our line to the very top. In many cases, we leave opening price points to our wholesale dealers.” TNF is seeing “unprecedented growth” in its online sales.

Drive Growth in Key Geographic Markets: “Continue the brand's global expansion, with international revenues targeted to grow nearly 20% annually over the next five years. Revenues in Europe and Asia are expected to grow at annual rates of 16% and 30%, respectively. TNF is uniquely positioned to lead and shape the outdoor industry in China, the world's fastest-growing market.”