The North Face has unveiled ambitious plans to double business in the next five years, going from this year’s level of $1.4 billion to $3 billion by 2015. The outdoor equipment and clothing brand, owned by VF Corporation, aims to expand its footprint by introducing innovative products, by further developing its product range outside the outdoor segment and by capitalizing on emerging markets while expanding its merchandising and marketing efforts.
For the next five years, TNF’s management wants to achieve compound annual growth of around 14 percent in the Americas; 16.4 percent in Europe, the Middle East and Africa (EMEA); and 30.5 percent in the Asia-Pacific region. It wants to grow its share of the global outdoor market from 9 to 11 percent. These goals sound rather reasonable considering that TNF is only the sixth-largest sports brand in the world and that it has been growing in the last eight years at average compound annual rates of 23.7 percent worldwide and 23.8 percent in EMEA, exceeding previous expectations. Since 2006, its average annual growth in Asia-Pacific has been 112.9 percent.
The outdoor sector still represents more than 80 percent of TNF’s turnover in all the regions, but while the brand expects to continue to grow strongly in this market, higher growth rates are expected in the areas of action sports (such as ski or snowboarding), performance sports (such as running) and youth (children and toddlers).
In the EMEA, where TNF’s sales probably reached $363 million in 2010, up from only $66 million in 2002, the outdoor sector is now generating 88 percent of the total turnover, but its share is set to decline to 76 percent by 2015, when the brand is expected to achieve sales of $776 million in the region. Action sports would rise from 9 to 17 percent of the total, performance from 1 to 3 percent, and youth from 2 to 4 percent.
The U.K. is currently the largest single market for TNF in Europe, representing 30 percent of EMEA sales along with Ireland. The Germany/Austria/Switzerland region represents 23 percent of sales, Italy and the Nordic countries 9 percent each, and France and Spain 6 percent each.
The important Germany/Austria/Switzerland region is becoming a more important piece of the pie, however, with sales up by 27 percent so far this year, including a 31 percent increase at its own stores. The management attributes the progress to recent heavy marketing investments that have allowed TNF to increase its brand awareness ratio in Germany;
The business plan for EMEA calls for TNF to raise its estimated share of the European outdoor market from 7.4 percent now to 12 percent by 2015. At the national level, the company estimates its market shares at 13 percent in the U.K., 11 percent in Italy, 6 percent in Germany and 3 percent in France, indicating strong potential for further growth on the Continent. In Germany alone, TNF is targeting a 14 percent share of the outdoor market by 2015. TNF is also bullish about its potential in at least two emerging European markets – Russia and Turkey – where it still has a limited presence.
Part of the European growth is expected to stem from the gradual roll-out of new TNF stores and the expansion of e-commerce. Direct-to-consumer sales are planned to rise from 11 to 26 percent of the EMEA turnover by 2015. Already launched in the U.K. and Sweden, the offer of TNF products over the internet will be activated in Spain, Italy and France in 2011.
In the Asia-Pacific region excluding Japan and Korea, where TNF doesn’t own the brand, the retail channel is instead predicted to fall from 22 to 20 percent of sales over the next five years as the wholesale segment is developing rapidly there (much more in The Outdoor Industry Compass).
