By Eric Smith

The numbers that the Vans leadership presented at Wednesday morning’s investor meeting in Costa Mesa, CA, were staggering relative to the company’s current financial snapshot of $3 billion in annual revenue for fiscal 2018.

The footwear and apparel brand expects to generate compounded annual growth rate (CAGR) of 10 percent to 12 percent each year over the next five years to reach $5 billion in annual revenue by 2023.

“It’s not a number we take lightly,” Steve Rendle, president and CEO of Vans parent company VF Corp., said during the investor meeting. “A lot of work has gone into understanding how that will come by region, by product category and by channel.”

To reach the goal, Vans will need double-digit increases in footwear and apparel, at home and abroad, through direct-to-consumer and wholesale. And while the company has plenty of work to do in the next five years, especially in light of ever-shifting consumer demands and a constantly changing retail landscape, Vans and VF are confident they have forged the right strategy to get there.

History is on Vans’ side. Since being acquired by VF Corp. in 2004 for $396 million, Vans has grown at a 17 percent CAGR and expanded its reach across the globe. Vans is the corporation’s largest, fastest-growing and most profitable brand, a notable accomplishment alongside such VF brand stalwarts as The North Face, Dickies and Timberland.

Vans, which expects to notch $3.4 billion in fiscal 2019 on 20-plus percent CAGR, is already on target to surpass its 2021 strategic goals laid out for analysts and investors last year—$3.3 billion on 8 percent to 10 percent CAGR. So Vans decided to set the bar even higher, and at Wednesday’s investor meeting, executives outlined specific ways the company expects to clear it.

“It’s an opportunity for us to rethink the trajectory of this business,” Rendle said. What’s behind the brand’s success to date—and what will propel it toward $5 billion—is the management team, Rendle added, specifically “the quality of their knowledge, the connectivity they have as a team and how they are focused on a clear set of integrated strategies and capabilities that are driving this business.”

In Wednesday morning’s press release, Vans said it “expects diversified and balanced growth across all product categories, channels of distribution and geographies, driven by disciplined execution and investment to continue to fuel growth.” The company’s specific financial targets include:

  • Footwear revenue is expected to grow at a five-year CAGR between 10 percent and 12 percent. Heritage footwear is expected to grow at a CAGR between 8 percent and 10 percent and Progression footwear is expected to grow at a CAGR between 14 percent and 16 percent.
  • Apparel and accessories revenue is expected to grow to more than $1 billion which represents a five-year CAGR between 13 percent and 15 percent.
  • Direct-to-consumer (DTC) revenue is expected to grow to approximately $3 billion representing about 60 percent of global brand revenue and a five-year CAGR between 13 percent and 16 percent. DTC Digital revenue is expected to grow to more than $1 billion which represents a five-year CAGR between 30 percent and 35 percent.
  • Revenue in the Americas region is expected to reach approximately $3 billion which represents a five-year CAGR between 10 percent and 12 percent.

But understanding where Vans wants to go requires a quick look back at the brand’s origins. Brothers Paul Van Doren and Jim Van Doren, along with partners Gordon Lee and Serge Delia, founded the Van Doren Rubber Co. in 1966 in Anaheim, CA. They made shoes to order right in their small store and sold pairs to 12 customers on opening day.

The brand slowly grew, but soon became an icon in the Southern California skateboard scene and even made its way into popular culture when the Vans Classic Slip-On, with its famous checkerboard design, appeared in “Fast Times at Ridgemont High.”

Good times and bad ensued over the years, including a bankruptcy and, perhaps more importantly, falling out of favor with the company’s core audience—skateboarders—in the early 2000s. This led to the eventual purchase by VF in 2004.

That move helped Vans reignite brand loyalty and gave the company the scale needed to expand beyond its then-footprint into new markets. Vans truly began the company’s evolution from Southern California skate brand to a global action sports brand.

Over the decades, across the geographies and throughout ownership structures, Vans maintained seven foundational beliefs which Doug Palladini, Vans global brand president, outlined Wednesday for investors and analysts. He said these are key to understanding how the company plans to stay true to itself while also fostering rapid growth among both brand loyalists and newcomers.

According to Palladini, Vans’ core tenets are:

  1. Open to anyone, but not for everyone. Vans is inclusive by nature but understands that not everybody in the marketplace wants to wear the brand.
  2. Clear about who we are and who we are not. Vans is rooted in skateboarding and is focused on four pillars of arts, music, action sports and street culture.
  3. Imperfect = beloved. Vans shoes aren’t meant to be collected, kept in a box and never worn but are meant to be loved and even thrashed through experience.
  4. Checkerboard, not checkbook. Vans isn’t the world’s biggest lifestyle sports brand but is connected to youth culture and builds brand loyalty through meaningful connections with consumers.
  5. Global consistency with local relevancy. The brand has moved way past the company’s California skateboard roots and even beyond the Americas to about 85 countries, where Vans works to connect with each region where its products are sold.
  6. Hungry and humble. Vans is proud of being a culture-led brand that acts with humility.
  7. Off the wall. Vans’ longtime mantra is about not adhering to tradition.

After detailing the foundational elements, Vans then explained the growth drivers needed to reach $5 billion. They are:

  • Customer connectivity: “Over the last 50-plus years, Vans has grown by staying true to who we are, by listening to our consumers and by enabling creative expression,” the company said. “Our strategic choices and executional discipline will allow us to continue that legacy in an aligned and powerful way.”
  • Icons and innovation: Vans authenticity is based on the history and strength of our iconic franchises,” but the company is also squarely focused on a “test and learn” mindset to foster innovation.
  • Expanding next generation direct-to-consumer: “Direct-to-consumer business is a strategic enabler for Vans to drive awareness, affinity, aspiration and sales, productivity and profitability.”
  • Inspire Asian expressive creators: Asia is a key market for the brand to reach its growth potential.

Many levers will pull these growth drivers for Vans. One is global diversity. The company expects double-digit growth in all regions led by 17 percent to 19 percent CAGR in Asia.

Another is retail expansion. Vans is expecting the company’s store teams continuing to be a “key point of differentiation and competitive advantage,” as the company ramps up retail push with new concepts for storytelling via window, interior and footwear walls inside stores.

Another is apparel. The company expects to grow apparel and accessories significantly, with projections of double-digit growth and reaching $1 billion, or 21 percent of the company’s overall business, by 2023.

Yet another is e-commerce and omnichannel. The company views Vans.com as “more than a sales channel, it is an opportunity to create powerful brand experiences.”

And uniting all these drivers are marketing and digital storytelling, which Vans will ramp up as the company works to grow mind share and marketshare around the world.

The response to Vans’ growth goals and strategic plan to reach them has been positive, with Jim Duffy of Stifel writing in a note to investors (before the meeting), “We view Vans as a powerful youth lifestyle brand and see this as an ambitious but achievable objective, and we see this confident view as an endorsement of near-term trends.”

Aiming for $5 billion is lofty, ambitious and aggressive. But the tailwinds are in place, along with the power and scale of VF Corp. and a detailed roadmap to get there. All of which might be enough for this “off the wall” brand to meet a goal the founders likely wouldn’t—or couldn’t—have imagined in 1966.

“Vans is moving into its rightful place as the No. 3 global sport lifestyle brand by being clear about who we are and who we are not,” Palladini said. “By forsaking ubiquity and instead focusing on Vans’ brand pillars of art, music, action sports and street culture, we continue to generate deep and meaningful consumer connectivity that is growing the Vans family worldwide.”

Photo courtesy Vans

[author] [author_image timthumb=’on’]https://s.gravatar.com/avatar/dec6c8d990a5a173d9ae43e334e44145?s=80[/author_image] [author_info]Eric Smith is Senior Business Editor at SGB Media. Reach him at eric@sgbonline.com or 303-578-7008. Follow on Twitter or connect on LinkedIn.[/author_info] [/author]