At VF’s Investor Day, “Reinvent to Grow,” company President Bracken Darrell highlighted six areas that the company is focused on at the enterprise level to build a competitive advantage and revive profitability and growth.
- Elevate Design: create products and experiences, placing the consumer at the center.
- Modernize Marketing: Develop richer storytelling and brand building, supported by influencer-led activation and social media.
- Engage Global Commercial Platform: Leveraging multi-brand commercial platform to provide differentiated performance via key strategic account partnerships, retail excellence and e-commerce execution.
- Integrate Business Planning: Drive cross-functional alignment and coordinated execution, supported by forecasting engine and optimization tools that connect data across functional silos and regions.
- Use of Case-centric AI: Scale traditional and GenAI across operations.
- Talent Development: Increase cross-functional collaboration for more agile decision-making and build talent academies across key functions.
Around elevating Design and Innovation, Darrell, who assumed the CEO role in July 2023, pointed out that a large part of his success in turning around his last company, Logitech, was focusing on design “because design correlated with consumer obsession.”
He said he has found that design has been too low a priority at VF, including at the senior and responsibility levels. He noted that the company hired Alastair Curtis, the former chief design officer at Logitech, as VF’s first chief design officer at the executive level.
He elaborated, “I love design, and I love products. It’s in my blood. What I found here is that design was too far down in the organization. These brands are built on great products, and it starts with the choices you make in design. The brand presidents need design on their staff. And the merchandising leaders need to see design as their equal partner, not the direct report. In my experience, where design reports in an organization is a pretty good proxy for how powerful and innovative it is. In the company, none of our teams had design reporting to the presidents, and the CEO of VF has never had a head of design for the enterprise overseeing the craft, the talent, the culture and the capabilities of design. Now we do.”
On Brand Building and Marketing, Darrell said, “Marketing has changed so much in the past 20 years, past five years. We’re taking our marketing engines from a more conventional one to a much more modern and efficient one. We’ve been a slow mover, but we’re moving fast today. ROI will increase dramatically in the years ahead.”
Darrell discussed the move last fall to create an Americas regional platform modeled on the company’s successful operations in EMEA and APAC, an overriding effort to establish a global commercial organization. Darrell said, “In EMEA and APAC, we had a strong model with regionally based teams. In North America, the execution was kept together with the brands. This duplicated organizations in the U.S. and gave us mediocre execution in the Americas. Ten months ago, we established a single, unified, global commercial organization to ensure we had the same integrated, intense marketplace execution across our brands in our home market. We’re seeing good progress.”
Darrell added that integrated business planning covers many facets of the organization but is “absolutely central to our operation and profitability, as well as our working capital usage. This is an area where we can do a lot better. It’ll lead to higher gross margins and lower inventories. We’re investing heavily in this space.”
On Capitalizing on AI, Darrell said that given his tech background, he understands “the hype curve,” but he believes the technology will become “super important to this industry. In this business, we’re already well downstream on using AI in very high ROI-use cases, and there’s more to come.”
Finally, he said Talent Development will receive a high priority. He remarked that one of the reasons he’s confident in VF’s turnaround is because he has a “terrific and aligned team,” with 12 of the 15 members of VF’s executive team new to their roles. Darrell said, “I’ve had the benefit of working at some academy companies. P&G is where you learn to build products to market and to run a business. GE, where finance talent and general management talent were absolutely sacrosanct. But I’ve never seen it done the way we plan to do it here at VF.”
Beyond investing in the six scalable capabilities, other enterprise-level priorities include:
- Capitalizing on VF’s multi-brand portfolio anchored in performance: VF’s brands will remain anchored in the performance category with style elements that further expand the platform for growth. The company is adopting a unified way of operating that can be scaled across the multi-brand portfolio.
- Creating an optimal value-building P&L structure: A series of integrated workstreams are underway and making progress addressing key capability gaps with a focus on reducing the SG&A cost base, expanding gross margin and positioning the company for future revenue growth. These actions together are expected to create a scalable and highly cash generative P&L structure.
- Committing to further strengthening the balance sheet: VF intends to reduce debt and leverage further to reach its optimal capital structure. The company will continue to prioritize free cash flow2 and debt reduction with a goal of further reducing net leverage. While prioritizing debt paydown, VF remains committed to returning capital to shareholders through paying a quarterly cash dividend, subject to approval by VF’s Board of Directors.
VF also set medium-term financial targets including:
- Adjusted operating margin of at least 10 percent by FY98
- Adjusted gross margin of at least 55 percent by FY98
- Adjusted SG&A as a percentage of revenue of 45 percent or lower by FY98
- Net leverage of 2.5x or below FY98
Darrell said all those profitability and debt-reduction goals are achievable with no incremental growth. He noted he does no t make “too many public commitments” and does not like to “over promise,” placing a big priority on delivering on measurable goals. He said, “If we say, we do it.”
Darrell noted that VF is on target or largely ahead of goals previously set around strengthening the balance sheet, reducing costs, achieving or exceeding financial targets, and sequentially improving sales trends. However, Darrell said he was confident that VF would return not only growth but healthy growth in the long term.
“In the short term, VF’s shares are trading way below our historic highs. We have high leverage today, but as you’re going to see, we have a clear path to de-leverage, which we’ve already started to achieve. Our operating income is at historic lows. We have a clear path to much better operating margins, even with no growth at all. And growth will come, and that’s just the short term. Longer term, we have a path to 10 percent operating income plus the impact of growth on leveraging our costs. We have a very, very powerful portfolio brands in attractive and growing markets. In fact, our markets in general are forecast to grow between 3 and 6 percent. We have an exceptional management team. And we’ll be building key capabilities to advantages versus the rest of the industry.”
Also presenting at VF’s “Reinvent to Grow” Day were Abhishek Dalmia, chief strategy, transformation and digital officer on VF’s Reinvent transformation program, Martino Scabbia Guerrini, chief commercial officer and president of Emerging Brands on VF’s commercial platform overhaul, and Brent Hyder, chief people officer, on leadership and culture. Paul Vogel, CFO, addressed financial targets.
The event represented the first of a two-part forum initially focused on broader enterprise strategies. Brand presentations are scheduled for a second Investor Day later this year.
Image courtesy VF Corp.
