Driven by growth from its five largest brands in the region Timberland, Lee, The North Face, Vans and Kipling, VF Corp. expects to reach $2 billion in sales in the Asia Pacific (APAC) region by 2017. The target represents an annual growth rate of 17 percent from 2012 forecasted revenues of approximately $900 million.
Despite signs of a slowdown in the nation, the growth is expected to be driven in China and through expansion for The North Face, Timberland and Vans. All three brands are expected to aggressively expand their store opening pace there.
At an investor meeting held in Shanghai, company officials confirmed its previous 2012 expectation given on July 27 for revenues in Asia to increase about 20 percent, and for revenues in Europe to grow at a low double-digit rate. With the targets, overall international revenues could account for 45 percent of VF’s total revenues by 2017, up from 37 percent expected this year.
“Our Asia Pacific revenues have grown nearly five-fold since 2007 and we continue to see tremendous opportunities for growth in all our brands,” said Eric Wiseman, VF’s chairman and CEO. “That’s the power of VF’s diversified global portfolio.”
By geography, substantial growth in each major Asia Pacific country was predicted over the five-year period.
China, currently making up about half of the APAC region’s total revenues, is expected to account for 60 percent of total revenues in the region by 2017, growing at an annual rate of approximately 21 percent over the five-year period. Overall, China is expected to grow from $460 million in sales in 2012 to $1.2 billion in 2017. Covering its four key categories outdoor, youth culture, jeanswear and casual bags, VF expects to expand its door count in China from approximately 2,300 currently to 6,000 by 2017.
“VF has invested heavily and consistently in consumer research in China, which has helped us better understand Chinese consumers and position our brands in a way that speaks to their desires and aspirations,” said Aidan O’Meara, president, VF Asia Pacific.
India, where VF sells Lee and Wrangler and recently introduced Vans, is expected to grow at an annual rate of 22 percent, and increase from 8 percent to 10 percent of total APAC revenues by 2017. In Japan, revenues are projected to grow at an annual rate of 8 percent over the next five years, with the rate strengthened by its acquisition of the Timberland brand.
Korea, where VF announced that it is opening a new subsidiary office, should represent the fastest-growing region, with revenues expected to grow at an annual rate of 52 percent. The subsidiary will initially support the Vans brand, with the expectation of adding Timberland sometime in the middle of next year.
Among brands, The North Face is expected to grow its APAC revenues by $340 million over the next five years, representing an annual growth rate of 26 percent. At $160 million currently, the goal is to reach $500 million by 2017. China is expected to account for 95 percent of TNF's APAC growth, with a five-year 28 percent growth rate. The North Face’s door count in China is planned to grow from 600 doors to 1,700 by 2017.
Jacob Uhland, general manager APAC, The North Face, said people in China “are looking for a release from stressful city life,” feeding an appetite for outdoors among the young and active.
Outside its own stores, key drivers of the growth include grassroots outdoor community engagement, growing brand awareness with its core “aspiring adventurer” consumer, elevating its franchisee and specialty wholesale support model, brand-relevant localization and digital innovation. Like its other regions, outdoor education programs around China as well as expeditions with the best athletes in Asia are planned.
TNF’s “aims to be the indisputable leader in Asia’s outdoor market, and the category-defining brand that inspires and enables a movement to explore the outdoors,” VF said.
Timberland, currently VF’s largest brand in the region, is targeting revenue growth of $230 million in the APAC region over the next five years, an annual growth rate of 13 percent. It currently generates $270 million with the five-year goal also landing Timberland at $500 million.
Like North Face, China is expected to lead the way, driving 60 percent of Timberland’s APAC growth. Timberland is looking for 30 percent CAGR in China over the five-year period. Timberland doors in China are expected to grow to 700 doors in five years from 180 doors.
In his presentation, Stewart Whitney, VP and managing director Timberland APAC, touted the successes the brand has already been having in the region. That includes strong double-digit growth since 2009, a highly profitable and leverageable retail platform, and the benefit of having a solid foundation in both footwear and apparel in the region. He also said Timberland’s success in Japan is expected to translate to and influence other Asian Markets. Whitney also said “being green” is becoming more important, especially with Millennials.
Other growth strategies for Timberland include leveraging consumer insights and leading in sustainability and community engagement. On the eco-front, a particular focus will be expanding Earthkeepers, its eco-conscious line started in 2007 that now represents 40 percent of its overall collection and represents over 50 percent of total sales in Asia. It also plans to leverage leading green technologies, introduce Green Index Labeling, and drive advocacy and preference through communication. From a positioning standpoint, VF said Timberland “aspires to be the largest, most sustainable casual outdoor lifestyle brand in Asia.”
Timberland also plans to build its spring/summer mix in the APAC region to 45 percent in five years from 39 percent currently, as well as expand the brand’s women’s business.
Vans’ revenues are expected to increase $200 million to the region, representing a 22 percent CAGR. The skate brand does $115 million in the APAC region currently and expects to reach $315 million in five years.
China is expected to account for 51 percent of Vans’ APAC growth, increasing at a 24 percent CAGR. It expects to increase from 1,500 doors from 500 currently.
Mitch Whitaker, general manager, Action Sports APAC, Vans & Reef, said that among Chinese youth, tension exists “between fitting in and standing out.” He noted that while action sports are “not fully understood,” the activities are proving to be “aspirational.”
While Vans has 500 doors, its position remains small relative to the competition and consumer insights confirm Vans’ values resonate with its consumers.
Growth drivers for Vans include leveraging the brand’s authenticity and connectivity with youth culture, focusing on its skate and music brand pillars, expanding direct-to-consumer and delivering locally relevant product. Vans “seeks to be the number one action sports and youth culture brand in Asia,” VF said.
Kipling expects to add $80 million in revenues in the region, representing an annual growth rate of 18 percent. The brand aims to be the “clear market leader” in the premium casual bags and accessories across the APAC region.
Lee, the jeans brand, expects to grow its business in the region by $150 million over the next five years, with a 12 percent annual growth rate.