VF Corporation, the U.S.-based owner of The North Face, Vans, Timberland and many other brands, told investors at a meeting in Shanghai last week that it was eyeing sales of $2 billion in the Asia-Pacific region over the next five years, compared with about $900 million this year. This calls for Asian sales to expand at an average annual rate of 17 percent until 2017.
At the same time, the company reiterated its forecast that its sales in Asia would jump by about 20 percent this year, while European sales would expand at a low-double-digit rate.
The VF group has already made huge strides in Asia in the last years, since its regional sales have multiplied almost fivefold since 2007. About 90 percent of the Asian growth in the coming years should be driven by five of the group's brands: Timberland, The North Face, Vans, Kipling and Lee, the jeans brand.
Timberland, which was taken over by VF last year, is the group's largest brand in Asia, with sales that should reach about $270 million this year. It is targeting average annual sales expansion of 13 percent over the next five years in Asia, to inflate its regional sales by $230 million to $500 million in 2017.
About 60 percent of that growth should come from China, where Timberland wants to increase its number of franchised stores from 180 to 500 in the five years. This should stimulate sales growth projected at an annual average of 30 percent in China. Stewart Whitney, vice president and managing director for Timberland in Asia-Pacific, said that the brand also wanted to improve sales of its summer ranges, to build on its women's business and to launch its own retail operations in China.
The North Face is meant to expand much faster, at an annual rate of about 26 percent, to raise its sales in Asia-Pacific by $340 million over the next five years – from an estimated $160 million in 2012 to $500 million in 2017. Jacob Uhland, the brand's general manager in Asia-Pacific, said that China alone should generate about 95 percent of this growth, with average annual sales rises of 28 percent.
The North Face's plan is to make more products adjusted for the Asian market and to increase its number of franchised stores in China from 600 to 1,700 by 2017. The brand is meant to take advantage of the Asian outdoor market's rapid expansion; to help stimulate the rise of an outdoor community in China; and to increase the brand awareness among Asia's “aspiring adventurers.”
Bruno Feltracco, vice president and managing director for VF's outdoor and action sports business in Asia-Pacific, estimated that the Chinese outdoor market alone was worth $1.7 billion at retail in 2011 and the broader “outdoor-inspired market” reached roughly $4 billion, with an expansion of 40 percent in 2011. The North Face's target is to become the undisputed market leader in the Asian outdoor market.
The same target has been set in the Asian action sports market, where VF wants the Vans brand to become the leading brand. The objective is to obtain average annual sales growth of 22 percent over the next five years, adding about $200 million in regional sales – from an estimated $115 million in 2012 to $315 million in 2017.
However, the expansion should be more balanced at Vans in terms of geographic spread. China is expected to contribute 51 percent of the growth, with average annual sales rises of 24 percent. Mitch Whitaker, general manager for action sports in Asia-Pacific, said that the plan was to have about 1,500 stores in China by 2017, compared with a current tally of 500.
Across all VF brands, China should account for sales of about $460 million this year with the Lee, Wrangler, North Face, Vans, Kipling and Timberland brands. That country alone is expected to account for about 60 percent of regional sales by 2017, with an added $740 million in sales over the next five years. This would require Chinese sales expansion at an average annual rate of about 21 percent. The rise should be driven by franchised stores, as the group intends to raise their number from 2,300 to 6,000 by 2017.
Meanwhile, India is expected to contribute sales growth at an average annual rate of 22 percent over the next five years. Its share of the VF group's turnover in Asia-Pacific would then increase from 8 percent in 2012 to 10 percent in 2017. For the time being, the group markets only the Lee, Wrangler and Vans brands in India.
The group's sales in Japan were reinforced by the acquisition of Timberland and they are expected to expand at an annual rate of 8 percent, but since this is lower than expectations for other parts of the region, Japan's share of Asia-Pacific sales should drop from about 17 percent this year to 11 percent in 2017.
The most rapid growth is expected to come from South Korea, where the VF group has just opened its own office. Korean sales are projected to increase at an average rate of 52 percent per year over the next five years, making up 6 percent of the group's Asia-Pacific sales by 2017. The subsidiary will start working with the Vans brand, and Timberland should be added toward the middle of next year.
The group's heady growth in Asia as well as Europe should rapidly raise the share of its sales from international markets. While this share should reach about 37 percent this year, it is expected to increase to about 45 percent of the group's global turnover by 2017.
