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VFC: Evolving Behaviors Perfect for Brands, DTC

Emerging consumer behaviors and values born out of the COVID-19 crisis bode well for the parent of Vans, The North Face, Timberland and Dickies brands, the company says. So with an eye toward possible acquisitions post-pandemic, further revenue growth from Direct to Consumer sales and maintaining enough product freshness in a fiscal year where a promotional environment is likely to persist for at least two quarters, VF Corp. executives are optimistic about the company’s go-forward path.

“We believe people will place greater value on exploring outdoors after spending so much time in their homes. And we believe there will be an increased commitment to personal well-being and active lifestyles, with health becoming a major new priority,” VFC President and CEO Steve Rendle told analysts late last week as the Denver company reported a 2 percent increase in annual revenues to more than $10.48 billion. The topline was dragged down by an 11 percent decline in fourth-quarter revenues that was fueled by lower consumer demand related to the COVID-19 outbreak.

For the full year, VFC’s U.S. sales rose 3 percent. Globally by segment, Outdoor revenues were essentially flat at more than $4.64 billion; Active sales were up 4 percent to nearly $4.92 billion and Work revenues were flat at $886.4 million. Annual global revenues by brand included 10 percent growth for Vans, including 10 percent in the Americas; a 3 percent increase for The North Face, including a 2 percent gain in the Americas; a 6 percent decline for Timberland despite flat Americas’ revenues for the brand; and a 3 percent increase for Dickies both globally and in the Americas. While the company’s own DTC platform currently accounts for 12 percent of overall revenues; the company’s total digital footprint, including digital wholesale, is estimated at nearly 20 percent of the topline.

CFO Scott Roe told analysts that the company’s exposure to the “more structurally challenged mid-tier and department store channels” represented less than 5 percent of FY20 revenues as U.S. Wholesale represented approximately 25 percent of the topline.

“The largest portion of our U.S. brick-and-mortar wholesale business fits into what we call specialty, which is primarily comprised of differentiated healthy, outdoor, active and athletic retailers,” Roe said. “Most of these retailers are healthy and growing digital businesses of their own.”

Anticipating high-teen inventory growth in the first quarter, VFC expects the second quarter to show sequential improvement in North America and the EMEA regions before both geographic markets stabilize ahead of the fall/holiday season, despite likely continued promotional activity. That environment should begin to moderate as retail consolidation begins to stabilize and the impacts of excess inventory lessen, Roe added.