Dive Brief:
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Total Q3 revenue at VF Corp fell 2.6% to $3.5 billion, with Vans tumbling 13%, Dickies down 16%, Timberland flat and The North Face up 7%. Wholesale fell 3%, and DTC revenue fell 2%.
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Though they are profitable, backpack brands Kipling, Eastpak and JanSport may be sold as the conglomerate evaluates strategic alternatives for that business, according to a company press release.
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Also in the quarter, adjusted gross margin contracted 140 basis points to 54.9%, mostly due to increased promotions. Net income fell 1.9% to $507.9 million.
Dive Insight:
VF Corp has spent the better part of the last decade rearranging its portfolio, including the spinoff of denim brands Wrangler and Lee and the sale of its workwear business. Its most high-profile acquisition was in 2020, when the company paid more than $2 billion for cult brand Supreme.
But for now, aside from possibly emptying out its backpack business, the company is done tinkering with its holdings.
“We will focus on near-term growth efforts on our existing portfolio,” interim CEO Benno Dorer told analysts during a conference call Tuesday. “Smart acquisitions will remain part of the VF playbook, but near-term we believe we are best served to return to strong shareholder value-creation by taking advantage of the many opportunities offered by our portfolio of beloved brands, including those acquired in the recent years.”
That focus seems trained squarely on skater brand Vans, which is no longer the reliable revenue generator it once was. Its Q3 revenue drop was the fourth straight quarter of month-to-month declines, according to Wedbush analysts.
“The brand has experienced a steady decline in popularity, unable to keep up with rapidly changing fashion trends and adapt its products to meet consumer demand,” GlobalData Apparel Analyst Louise Deglise-Favre said in emailed comments, adding that the brand does have some fresh opportunity thanks to a “wave of noughties nostalgia” led by Gen Z.
Nearly a year ago the company brought Kevin Bailey back to again lead Vans. Now Dorer, who has been interim CEO of VF Corp since December when longtime chief Steve Rendle left unexpectedly, is also looking to The North Face for answers. The outdoor brand was a winner during the pandemic and continues to perform well. Adjusted for currency fluctuations, the brand’s revenue rose 13%, with growth in all regions globally, DTC and wholesale, Dorer noted. The company also raised its guidance for the brand.
“The North Face is a solid and transferable execution blueprint for Vans, and frankly, the entire VF portfolio in the Americas, where we must grow with consumers more consistently,” he said.
There is “a strong untapped opportunity” with the brand’s UltraRange line, where revenue grew 34% in the quarter but awareness remains low. The brand will also invest in product innovation, and cut costs and SKUs, among other steps, Dorer said. A test with 30% fewer SKUs at the Vans store in Irvine, California, led to a 12 percentage point bump in footwear sales, and that initiative will be expanded as of fall 2024, he said.
“Vans continues to be a fundamentally strong brand,” he also said. “The number of consumers buying Vans during the last 12 months was up, as was brand advocacy. But many people buy the brand less often. So what we do need to do is to fuel the brand more consistently and give people more reasons to buy more Vans. That is on us, and that’s what we will do.”
via https://www.aiupnow.com
Daphne Howland, Khareem Sudlow
