Speaking last week at the Telsey Advisory Group Consumer Conference, Eric Wiseman, VF Corp. chairman, president and CEO, said The North Face has grown consistently now at a 25% annual rate for eight years but still has significant growth opportunities as it opens stores and continues to exploits its potential as a lifestyle brand.
While the North Face brand started in equipment and outerwear, the growth opportunity has become bigger as the brand has moved more into lifestyle apparel.
“That's still a big opportunity with a lot of runway if you look at the size of the Lifestyle apparel market versus what The North Face does,” said Wiseman. He also noted that the brand is “still primarily a male business” with clear room to benefit from a greater “tilt” toward the female consumer. Footwear was also described as a “huge market” that can still grow. Internationally, Wiseman said The North Face is growing at a rapid rate and will exceed the VFC Jeanswear platform in its second full year. VF has been selling jeans in China for over 12 years.
Wiseman spent a large portion of his presentation explaining VF's retail expansion strategy. Overall, VF had previously announced plans to increase direct-to-consumer from 14% of its mix to 22% of the total. Last year, direct-to-consumer increased to 16% of total revenues with the opening of 89 stores around the world and new e-commerce websites. He particularly noted that “The North Face website was a big success for us last year.”
For the current year, VFC plans to open 70 stores across all its brands, including 15 to 20 TNF stores, slightly below its overall guidance calling for between 75 to 100 stores. Overall, VF has around 700 specialty stores worldwide across all brands.
“We think we have the opportunity to open another 400 or 500 stores and really build our brands,” said Wiseman, who also noted that The North Face stores are profitable, but he said, “They're always going to be a minor part of our business. The real impetus there is to learn more about our consumers and learn more about what works in in-store visual merchandising, and translate that to the thousands of stores that we sell to because that's the leverage point – taking what we learn and flipping it. Not into opening 5,000 stores, but translating it into 5,000 other stores that carry the brand so they can be more successful. We're going to continue to do that. And we look everywhere for leverage in our size and we'll continue to do that as well.”
Outside of The North Face, Wiseman said Kipling has been VF's fastest growing brand albeit off a “much smaller” base. Vans, Napapijri, and Reef, all also “achieved good growth” over the last eight years. He expects that 7 For All Mankind, Splendid and Ella Moss will grow in the 10% to 15% range. He expects lucy will grow 30% a year.
Given the economic climate, Wiseman noted that the company announced a cost-cutting program in Q4 to save $100 million annually and also plans to be conservative around inventories, But Wiseman said the firm will continue to invest in the brands delivering high returns.
Asked during the Q&A session about potential acquisitions, Wiseman said VF continues to look particularly for brands in the Action Sports space, followed by Outdoor, Contemporary and lastly, Sportswear.
He noted that adding to its Contemporary division has been less essential as the group absorbs its recent acquisition of Splendid and Ella Moss.
He noted that sales and EBITDA multiples have come down compared to a “particularly expensive” period from 2002 to 2005. But the overall focus for VF remains lifestyle brands that speak to different consumers” and have room for growth.
