Mackey McDonald, who oversaw VF Corp.'s transformation from stodgy and staid category player into lifestyle brand powerhouse, will end his 12-year tenure as chief executive officer on Jan. 1, making way for president and chief operating officer Eric Wiseman to take over.
Wiseman, 51, said in an interview that the company's direction would not shift.
"My perspective is that this is a transition of responsibility, not a change of agenda," Wiseman said. "The executive team here has been working on the growth plan for the past three years and that team is still here."
Wiseman's star has risen steadily and the groundwork for his ascendancy to the top job was laid out in recent years. He has been responsible for the company's day-to-day operations since March 2006, when he was named president and chief operating officer. In May 2005, he took on the role of executive vice president of global brands. He joined VF in 1995 as executive vice president of VF's JanSport business.
McDonald, who will retain the title of chairman, is a 24-year VF veteran and one of the longest serving chief executives in the industry. He joined the company's Lee division in 1983 and worked his way up the management ranks. He was appointed president in 1993. Three years later he was named ceo, and in 1998 added the title of chairman. McDonald will "remain involved on a full-time basis" to help identify future acquisition targets, the company said in a statement. Regulatory filings indicate that McDonald, 60, is eligible to serve on the board up to age 72.
"We are in a great place in that VF's transformation to a global lifestyle apparel company is well underway and producing outstanding results for shareholders," McDonald said in a statement. "We have achieved four consecutive years of record earnings and we anticipate another record year in 2007. In terms of management succession, I wanted to transition out of the ceo role when VF was in a very strong position with a very bright future and that's where we are today."
While multibrand apparel companies such as Jones Apparel Group, Liz Claiborne Inc. and Kellwood Co. have stumbled in recent years, VF has proved its formula is working. Revenues from continuing operations rose 45.7 percent to $6.21 billion in 2006 from $4.27 billion in 2002. Earnings for 2006 came in at $533.5 million, or $4.72 a diluted shared, compared with a loss of $154.5 million, or $1.38 a share, in 2002. Management expects another record year of revenues and earnings this year.One of Wiseman's biggest challenges will be keeping the momentum going, but he's confident many of the businesses can take advantage of their opportunities to grow organically.
"We think the initiatives we've been implementing...we're in the early stages of developing them," Wiseman said.
The company did not disclose whether it plans to fill Wiseman's current roles.
Under McDonald's leadership, VF has experienced a wholesale change in its DNA. Before he was named ceo, VF was known for its long and dominant position in several product categories. Its denim business was a multibillion-dollar force driven by the iconic Lee and Wrangler labels. The intimates business — home to the company's namesake Vanity Fair brand, as well as the Lily of France, Vassarette, Bestform and Curvation brands — was a second pillar.
The acquisition of The North Face brand in 2000 planted the first seeds for a strategy that would see management shift the focus from being a dominant category player to a company that excelled at acquiring and developing lifestyle brands.
The elements inherent in The North Face business became the key criteria management would apply to future acquisitions. The North Face had a small but extremely loyal consumer base. Its brand name was associated not with just one type of product, but with a way of life that centered around an outdoor experience. The brand also had ample room to expand both its wholesale business and its retail business domestically and abroad. It started achieving explosive growth soon after being acquired and is the bedrock of the company's outdoor business segment. With revenues of $1.87 billion in 2006, the outdoor business is now VF's fastest-growing business unit and it is the second-largest after denim.
In 2004, McDonald unveiled a "New Deal" for VF, revising the company's vision statement to reflect a commitment to achieving growth through the development of a portfolio of lifestyle brands. McDonald hoped to shed VF's reputation as a solidly performing but conservative apparel manufacturer.
"I don't think people understand how much VF has changed," he said in an interview with WWD at the company's Greensboro, N.C., headquarters in 2005. "Everyone thinks it's a conservative company with good control and good product. They don't understand how you can combine strengths of categories and come out stronger."Management moved aggressively on the new strategy, paying $667.5 million in cash in 2004 to acquire the Vans, Kipling and Napapijri brands, as well as acquiring a majority interest in a Mexican intimate apparel marketing company. These moves followed VF's purchase of Nautica in 2003.
The impact on results was immediate. Sales shot up 16 percent to $6.05 billion in 2004 from $5.21 billion in 2003. Earnings spiked 19.3 percent to $474.7 million, or $4.21 a share, compared with earnings of $397.9 million, or $3.61 a share, in the previous year.
During the first half of 2005, the company spent another $213.5 million to acquire Holoubek Inc., which holds the apparel license for Harley-Davidson, and Reef Holdings Corp.
Although no acquisitions were made during 2006, VF has made up for it with a flurry of activity this year. It opened 2007 with the sale of its global intimate apparel business to Fruit of the Loom for $350 million. In July, the company made the big-name acquisition that Wall Street had long been waiting for when it picked up top premium denim brand Seven For All Mankind for an estimated $775 million, and women's active lifestyle company Lucy Activewear for $110 million. The two companies will be the foundation of a new division, VF Contemporary Brands, with combined annual revenues of more than $350 million.
The current goal is to grow revenues by 8 percent annually. The long-term model calls for 5 percent of that growth, or about $350 million, to come through organic growth and the remaining 3 percent from acquisitions. Wiseman noted that in April the company reacquired the rights for The North Face brand in China, opening yet another avenue for expansion.
The company's heritage denim businesses, its largest segment, are expected to generate single-digit gains. The contemporary brands segment with Seven and Lucy will likely be the focus of acquisition growth.
"We think that in contemporary brand we're clearly in the beginning stages in every way," Wiseman said. "We think there are lots of contemporary brands out there that would be good fits for VF that would take us into lots of different shopping categories and a lot of different geographies. It's a high priority for us."On the Acquisition Trail
2007 Seven For All Mankind Eagle Creek Majestic Athletic Lucy Activewear
2005 Reef Holoubek (licensee of Harley-Davidson apparel)
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