VF Corp.’s five-year strategy to grow total revenues on a CAGR basis by high single to low double digits in constant currency and reach a 15 percent operating margin by FY27 is dependent on a number of factors. The total revenue expansion strategy includes a greater percentage contribution from The North Face, Supreme and its outdoor emerging brands (Altra, Icebreaker and Smartwool). With earnings per share (EPS) forecast to grow at a five-year CAGR of high single- to low double-digit percentage over the five years, the group is planning for an increased profit contribution from all of its dozen brands.
Here’s a closer look at specific brand initiatives as outlined during a company investor day this week.
Vans and its growth strategy
Vans: After achieving a 15% CAGR between FY04 and FY22, Vans has suffered recently through a number of missteps, notably overlooking “market signs” to evolve its core Classics business, a hurting business in China and a challenged direct-to-consumer business in the Americas. The operating model is being adjusted.
“The consumer has evolved and invited us to evolve with them,” proclaimed Kevin Bailey, who recently returned to Vans as global brand president. He admits that the brand’s icon management strategy was too restrictive.
The brand will lean on style adaptations and innovation to diversify its offering and stay “stylistically relevant.” Beyond its core sports business, Vans will focus on the skate, surf and snow markets. The skate market, which fuels streetwear trends, is on a rapid incline in China, where the brand is reducing its sales reliance on Tmall. The brand sees greater opportunity in head-to-toe offerings and will launch a Pinnacle collection, focused on top-tier distribution, exclusivity and higher price points, in H2/FY23.
FY27 revenue target: CAGR up mid-single-digit percentage in constant currency.
The North Face has its focus on footwear
The North Face: Specific objectives by FY27 include tripling current footwear and hiking-related revenues and doubling the number of mono-branded stores worldwide. Business is seen as breaking down as 50 percent from direct-to-consumer, 50 percent from wholesale accounts, 50 percent from the Americas and 50 percent from markets other than the Americas. With Germany and the U.K. key markets in the EMEA, the brand is developing key products for specific outdoor endeavors to satisfy the region’s more outdoor-oriented consumers. It intends to drive outsized growth in footwear and active/train and achieve faster expansion in its underpenetrated spring and summer product offerings.
FY27 revenue target: CAGR up high single- to double-digit percentage in constant currency.
Timberland celebrates its 50th anniversary in 2023
Timberland: The brand, celebrating a 50th anniversary in 2023, is gaining traction with younger consumers. It grew revenues by 20 percent between FY21 and FY22; has gained clarity and focus in recent years, as it has streamlined SKUs; has strengthened its DTC business; and has improved its head-to-toe offerings. The EMEA currently accounts for 34 percent of brand sales with footwear (76%), apparel (17%), DTC/digital (14%) and Pro (16%). With plans to open a New York City flagship store on Broadway by year’s end, the brand has 11 key cities (London, Milan, Paris, Berlin, Beijing, Shanghai, Tokyo, Seoul, New York, Chicago and Los Angeles) on its growth radar. Timberland has opened “The Shed,” a new maker space outside its corporate home in New Hampshire, that has the ability to build a full, 3D prototype in three to five days.
FY27 revenue target: CAGR up mid-single digit percentage in constant currency.
Surpreme plans more shop openings
Supreme: This streetwear brand was acquired for $2.1 billion in December 2020, but VF’s development plans for it were slowed by the pandemic. Once generating all of its revenues via direct-to-consumer, Supreme currently operates 14 flagship stores (four in the EU, six in Japan and four in the Americas). There are plans to double the brand’s global footprint over the next four years, by focusing on Australia, New Zealand, China and Southeast Asia. Recent openings occurred in Milan, Berlin, London and Beijing, with a Chicago store about to open. The brand launches two seasonal collections worldwide, 70 percent apparel-focused, annually. North America accounts for 60 percent of brand revenues currently. VF believes Supreme’s growth will benefit from its scale and agility.
FY27 revenue target: CAGR up high single- to low double-digit percentage in constant currency.
Dickies with a very low revenue stream from Europe
Dickies: The 100-year-old brand, which is said to have 70 percent global brand awareness, generates only 11 percent of its revenues from Europe. The product mix is 31 percent work/lifestyle and 69 percent work. The business is segmented by four groups – skilled trades, outdoor, streetwear and skate – but VF regards all of the brand’s consumers (workers) as athletes. An estimated 80 percent of products are being sold globally, with 20 percent region-specific. Dickies is collaborating with Jameson whiskey on a global marketing campaign focused on service workers and with Traeger grills on another in November. Dickies’ “Blank Canvas” campaign will launch later this year.
FY27 revenue target: CAGR up high single-digit percentage in constant currency.
You can find a general VF Corp. outlook until 2027 and a company portrait online.
