By Eric Smith
Normal day-to-day operations are enough to keep any $12 billion global company busy, but VF Corp. has taken on some extra initiatives that might make for some late nights yet will also create new shareholder value and transform the company in the process.
Among its more time-consuming activities, VF is moving its corporate headquarters to Denver, CO, spearheading ambitious growth plans up and down its outdoor and action sports portfolio—including a huge target for its Vans brand—and fine-tuning a new “purpose” the company laid out in July.
Soon after VF reported second quarter earnings on October 19, CEO Steve Rendle and CFO Scott Roe spoke with SGB at length about these items and more taking place at the (for now) Greensboro, NC-based company. Rendle and Roe dished on the forthcoming move to Denver, VF’s commitment to becoming a purpose-led company, Vans’ five-year journey to $5 billion in annual revenue, growth drivers at The North Face and upside at two smaller outdoor brands—Icebreaker and Smartwool.
Here are the highlights of what they shared on each topic:
Denver-bound: Move Parallels VF’s Swiss Blueprint
The plan for VF Corp. to relocate its global headquarters to Denver is on track, Rendle and Roe told SGB. Up to 800 employees will move to Colorado, including workers from the corporate office and from VF brands The North Face, Smartwool, JanSport, Eagle Creek and Altra.
VF last month announced it had signed a 12-year lease at 1551 Wewatta Street in Lower Downtown, where the company will occupy the entire 10-story, 285,000-square-foot building. Executives are still deciding on the signage that will adorn the building’s exterior—either VF Corp., one or more of the brands, or a combination of parent company and subsidiaries.
The company has been hosting “market immersion” trips for employees to visit Denver and learn about the area, and VF will begin moving in during the summer months, with the headquarters expected to be up and running by next fall.
Rendle said the company used its Stabio, Switzerland, office as a blueprint for the Denver location. The goal of “co-locating” brands in one location is to create an environment that fosters leadership and talent development, while also uniting multiple brands in the same workspace. This “gives our employees opportunities to experience multiple brands and move into new roles,” Rendle said.
“We’ve often talked about being able to create an environment like that here in the United States,” he said. “It’s not our practice to relocate brands in this manner, but as we looked at the high cost of living in California and the increasing difficulty of recruiting and attracting talent to that marketplace, this was the moment in time for us to make that decision to pick up and move to Denver.”
VF’s move to Denver is also another win for the city and the state of Colorado, which recently secured three Outdoor Retailer shows for at least five years, giving this community the “unofficial home of the outdoor industry” status—at least in some people’s eyes. SGB asked if VF’s move bolsters that claim and will help fuel the entire Colorado outdoor industry.
“I hope that it’s looked at as a decision that supports that vision,” Rendle said. “As we looked at Denver and Greater Colorado, as we met with the different economic development leaders and, ultimately, the governor, we saw that the pro-business environment and the commitment to outdoor access, clean air and clean water all lined up with our values and the purpose-driven nature that we are driving at our company. Those connect so well with the outdoor industry, so I think it’s very fair to say we will support and do everything we can to enable that to be even stronger.”
New Vision: VF Fine-Tuning ‘Purpose-Led’ Mission
Rendle’s comment on how the coming move to Denver feeds into VF’s purpose-driven mission proved to be an ideal segue into this next topic. In July, Rendle and other VF executives announced the company’s new purpose: “We power movements of sustainable and active lifestyles for the betterment of people and our planet.”
At Outdoor Retailer Summer Market in July, Rendle gave the keynote address at the Camber Outdoors breakfast and explained this vision in detail.
And in his recent comments to SGB, he listed how being purpose-led is exemplified in each of VF’s business divisions.
For VF’s outdoor segment, the company is committed to the environment, including access, inclusion and diversity. VF’s action sports business is about promoting creative self-expression, celebrating individual diversity and respecting every individual for who they are and what they stand for. And in the work segment, VF celebrates “the dignity and the importance of construction and trades to power our economy,” Rendle said.
SGB asked how the company balances meeting those diversity and inclusion goals while also hitting financial targets, and if they go hand in hand with each one elevating the other.
“They do go hand in hand,” Rendle said. “It’s not an “either/or” for us. We talk a lot about it being an “and.” You can absolutely be purpose-led while creating value through being performance-driven. What we ask each of us to do is in the decisions that we make, do them through the lens of being purpose-led while driving strong performance with the end result being value creation.”
“It doesn’t just matter what you make in terms of profitability; it’s how you make it,” Roe added. “The way in which you show up at work, the way in which you behave to the broader group and to your associates and the actions that you take. All of that matters equally—not more, not less—but equally with what we deliver.”
Vans: Path to $5B Should Boost Other Brands
VF’s best-performing brand of late has been Vans, which in September announced an ambitious plan to reach $5 billion in annual revenue by 2023 through a series of growth drivers that the company expects to generate compounded annual growth rate (CAGR) of 10 percent to 12 percent each year over the next five years.
Part of the strategy, Roe told SGB, is reframing the way the brand is perceived in the marketplace, which appears to have already gained traction, as the brand notched 26 percent revenue growth in Q2.
“It’s no longer about being the largest skate/surf brand, which it is, but it’s about Vans being an everyday choice in that athletic leisure lifestyle along with brands like Nike, Adidas, etc.,” Roe said. “When you think about it that way, we’re really just getting started. You see that on the street with how many people are choosing this as part of their closets. You see it in retail shops, where instead of on the back wall, it’s in the drive aisle and in the window. There’s more and more and more placement that puts Vans on an equal footing with some of these much, much larger franchises.
“We’re not saying that Vans is going to be Nike, but when you consider that Nike is 10 times larger than Vans, it’s pretty easy to see that we’re just getting started in terms of the long-term growth path for this brand.”
Rendle and Roe added that the confidence VF has in Vans should translate across the VF portfolio—a rising tide that will lift all brands.
“The way we run our business is we have pockets of excellence and demonstrated competency,” Roe said. “Vans probably has an outsized number of areas where we would say they’re really good at it, and we’re using their skills to leverage and broaden. There are other areas where they’re not as good, and we’re leveraging in from other areas in the VF. I think that’s where the power of VF really comes to bear—where one and one is three, not just two, because you’re magnifying and leveraging these capabilities.”
The North Face: ‘Resetting Its Foundation’
Vans has taken a lot of the spotlight in VF’s portfolio, but The North Face has also flourished. In Q2, The North Face’s revenues rose 5 percent, or 7 percent on a currency-neutral basis. The gains were led by DTC and digital across regions.
With continued oversized growth for The North Face in the EMEA region and some improvement in the Americas in the second quarter due to strengthening demand for lifestyle apparel offerings, VF raised guidance to 7 percent to 8 percent, up from 6 percent to 8 percent, which was also the five-year target, Rendle said.
“The brand is just resetting its foundation around mountain sports, bringing this new mountain lifestyle apparel, which extends its reach into the younger consumer,” Rendle said. “And then, as we come into this fall selling season, the urban exploration outerwear starts to come into view, supported by a stronger Summit series, Steep series, technical outdoor offering. We have reasons to believe the proof points are there that the brand is beginning to recapture that leadership position in the outdoor segment and able to achieve the growth rates that we’ve committed to.”
Icebreaker & Smartwool: Small But Not Forgotten
VF doesn’t always break out the numbers for two of its smaller outdoor brands—Icebreaker and Smartwool—so SGB wanted to dig a little deeper into the performance of those companies.
VF announced the acquisition of Icebreaker last November and closed on the deal in April. The company said it’s pleased with the portfolio’s newest asset and has high aspirations for the brand.
“The integration is going very well,” Rendle said. “The brand is growing on a pro forma basis in the low double digits. It’s a great brand. What excites us about Icebreaker is this notion of a company anchored in the natural fiber elements of merino, that nature can do it better. Icebreaker’s just got such a strong position there. The question now is, how do we combine that with our Smartwool brand and, even more importantly, elevate natural performance fibers across our portfolio?”
As for Smartwool, the popular brand not only is moving to Denver from Steamboat Springs, CO, but has a new president, Jennifer McLaren, who was appointed in June.
Read more: Four Questions: Smartwool’s Jennifer McLaren
“Jen has just been fantastic,” Rendle said. “She has such a deep understanding, a passion for that brand, a leader that that team looks to follow. And looking at Smartwool’s apparel offers for this fall, the early reads are really good sell-through.”
Photos courtesy VF Corp.