<span style="color: #a19f9f;">Speaking at the 2020 Stifel Cross Sector Insights Conference, Steve Rendle, VF Corp.’s chairman, president and CEO, said moves beginning in 2017 to reposition the business are serving the company “very, very well to navigate these times.” But he also believes VF is well-positioned to take advantage of four emerging trends accelerated by COVID-19: outdoor appreciation, health and well-being, sustainability and casual lifestyle.

Rendle said the trends were “obviously there prior to the pandemic but they’ve only taken greater shape and accelerated.”

People staying at their home amid social-distancing measures, he believes, are finding a renewed appreciation for the outdoors. Said Rendle, “They’re looking for ways to get outside with their families.”

Among VF’s businesses, The North Face is seeing purchases of tents and sleeping bags expand at a higher rate. Rendle observed how many are sharing their experiences, whether camping or cooking in the backyard, on social media, as they adjust to the “new normal” created by the pandemic. He said, “[They’re] really trying to generate some new excitement in the stay-at-home environment.”

As states and countries begin to reopen, visits to national parks and outside areas are seeing an uptick in a further sign of outdoor’s fresh appeal.

The health crisis has also drawn attention to personal health and a number of VF’s active brands, including The North Face, Timberland, Smartwool and Icebreaker, are “very well positioned” around the health and well-being message. Many individuals as part of that are making a “deeper commitment to running” and that’s particularly evident in the traction being seen by Altra, acquired in June 2018. Said Rendle, “Our Altra business, though small, is really at a front end of that uptick.”

With people increasingly working from home, the casual lifestyle trend has likewise been augmented and all VF’s brands address casualization to some degree. Rendle particularly called out the casual lifestyle opportunity for the company’s merino wool brands – Smartwool and Icebreaker – as well as Vans. He said Vans has become known for “bringing some fun, bringing some creativity to your everyday life in a very casual approach.”

Overall, Rendle said the strengthening trends support the shift VF has taken over the last three years to reshape its portfolio and position the company around the “total addressable market of outdoor, active and athleisure” as well as work lifestyle, led by Dickie’s.

Said Rendle, “We’re now in a place in the marketplace with good tailwinds and a deep commitment to being purposeful-led and performance-driven, enabling us to be positioned well and be well suited to accelerate as everything comes back to a new normal.”

Rendle spent time discussing the payback from that strategy shift that has an overall focus on “being more consumer-minded, retail-centric and hyper-digital in everything that we do.”

The moves include increased investments behind digital-commerce and “mobile-first thinking,” informed by consumer data. Said Rendle, “And all of this is very much positioning us to navigate a difficult marketplace where digital is becoming the primary touchpoint in understanding the consumer and how to become a more personalized provider of messaging and content.”

Indeed, Rendle said the company’s pivot toward digital over the last few months has been less about increasing transactions and more about driving engagement and building affinity. He added, “And really putting empathy first, and engaging consumers where they are and trying to bring some fun and some energy into what is a difficult transition to working and staying at home. And we’ve seen your very strong engagement across each of our brands.”

As an example, he pointed to the Vans Shoe Box Challenge, which he described as an “off-the-cuff idea” that encourages fans to “put forward their best creation” using a Vans shoe box. He said Vans saw “great engagement” with shares across social media and the overall scheme was in line with Vans’ “Creative Self-Expression” mantra and the notion of “bringing some fun to what is a challenging day.”

The shift also included a greater focus on building “purpose-led” brands built not only around sustainability for the planet and empowering active lifestyles for people but also supporting and connecting with communities.

The purpose-led focus also involves “being really forthright with what our purpose stands for,” with Vans being positioned around “Creative Self-Expression,” The North Face being about “Enabling Exploration,” and Dixies around “Supporting And Building The Independent Makers.”

He said the protests over the death of George Floyd again addressed the higher expectations consumers have from brands about supporting their community.

“Consumers are looking for and demanding that brands stand up and act, consistent with what they said they will do,” said Rendle. “And as they do that, you’re building much greater loyalty and long-term affinity.”

But Rendle said the “purpose-led” focus was something VF’s employees were asking for. Rendle said, “It’s not so much what we do but why do we do it. What’s the impact that we can have beyond just delivering strong revenue and earnings.”

Rendle the VF frequently talks internally about “our number one consumer is our employee” and he believes VF’s actions taken during the pandemic again reflect VF’s commitment to “putting our people first.”

Steps included not furloughing its retail teams as stores were closed and supporting its warehouse staff with hazard pay and in creating safer working environments. Rendle said VF recently saw a “dramatic jump” in its employee Net Promoter Score. Said Rendle, “They’re giving us high credit for our people-first approach, and really, maintaining that commitment and positioning our employees to help us emerge even stronger.”

VF also during the pandemic has supported its specialty retailers and supply chain partners “navigate access to capital where they need it” as another extension of that purpose-led focus.

With the protests emanating from the death of George Floyd, VF took additional steps to reinforce its “already strong resolve for inclusion and diversity” by having one-on-one listening sessions with its black and brown employees “to help understand what we can do differently to improve their work experience, how we can give back to the communities that they live and work in. And using our purpose, not as not just an investment vehicle, but really utilizing the strengths of our words to inform our actions and mobilize our people to make a change.”

Other insights from the discussion:

  • U.S. wholesale is about a quarter of its total business. VF has already said it plans for U.S. wholesale to be down as part of its five-year plan. Scott Roe, EVP and CFO, said VF has been reducing exposure to wholesale accounts seen “more at risk,” but still plans to grow at “relatively healthier” accounts, citing Dick’s Sporting Goods, Foot Locker, REI and Journeys as examples. Said Roe, “We’re focusing on those winners.”
  • Inventories at the end of its current fiscal first quarter are expected to be up high-teens after being ahead 10 percent at its fiscal year end. Sequential improvement is expected in the coming quarters with “equilibrium” expected by year-end. Steps to right-size inventories include stopping orders, reducing forward buys, liquidating merchandise while avoiding “dumping a bunch of goods on the off-price market,” and packing and holding some non-seasonal items. VF is still investing in bringing newness and innovation to inspire consumers in the second half.
  • Vans and Dickies have been relatively less-impacted by the pandemic for different reasons. Roe said Vans’ “strong digital presence” and sizeable China business has helped mitigate lost sales from store closures. Dickies likewise has a “relatively small but fast-growing Asia” that has reopened and also benefits because many of its wholesale accounts, such as Walmart, have been deemed as essential retailers and have remained open.
  • M&A remains “our number one priority” for capital allocation with share repurchase second. Roe said VF would need more confidence that “our core business is on sound footing” with healthy traffic resuming as retail reopens before tackling an acquisition.

Photo courtesy VF Corp.