Eric Wiseman, the company’s chairman, president and chief executive officer, told WWD that VF is interested in expanding its outdoor and active sportswear business to the midtier market and could turn to an acquisition to make it happen. Wiseman said the firm, which has been expanding its Lee jeanswear brand beyond midtier and into department stores, would consider moving in the opposite direction in its dominant Outdoor & Action Sports coalition.
“We ask ourselves if there are other product categories we could take to the midtier,” he said. “There’s nothing to announce at this point, but we would absolutely acquire a brand that could fill in a white space. A great brand to acquire that could take outdoor into a channel we’re not in? That’s something that would interest us.”
In the midtier and mass channels, confronted with weak consumer spending in recent months, VF’s apparel businesses have generally been stronger than those of its wholesale accounts. “We’re winning in those channels, but the channels are struggling,” he said. “Our job — and it’s true in the sporting goods channel as well — is to help our retail accounts win in apparel and we’d need other brands to help them win.”
The midtier and mass channels have sprinklings of outdoor products, many of them bearing stores’ private labels, but few with the power that, for instance, Lee and Wrangler have in the midtier and mass denim markets, respectively. VF is experienced in bringing brands to larger audiences, as it did after buying what was then a troubled North Face in 2000. In 2010, it bought the bankrupt Rock & Republic brand for $57 million and set it up as an exclusive brand at Kohl’s Corp. stores so that licensor VF and licensee Kohl’s share responsibility for production.
As was the case with The North Face prior to its acquisition, outdoor brands have tended to focus on specialty store distribution among outdoor and sporting goods retailers. Larger retailers, such as Dick’s Sporting Goods, tend to buy from vendors of similar scale.
Laying out some of VF’s acquisition criteria, Robert Shearer, senior vice president and chief financial officer, told analysts on a Friday conference call regarding the group’s fourth-quarter results, “We’re agnostic as to geography. We would buy a business anywhere in the world if it was complementary to our brand portfolio. And the size aspect given our current size, bigger deals, fewer bigger deals would be better for us to do. It may not always play out that way, but that’s what we’d prefer to do. And our balance sheet is so healthy right now, given our strong cash flow the last few years, we are in a position to do a big deal if we can find the right one to do.”
VF finished the fiscal year with $776.4 million in cash and cash equivalents on its balance sheet, up from $597.5 million at the end of 2012.
The group’s Outdoor & Action Sports coalition enjoyed a strong fourth quarter even as corporate results for the top and bottom line fell shy of analysts’ consensus estimates, sending shares down 5.1 percent to $56.85 on Friday. U.S. stock markets were closed Monday because of the Presidents’ Day holiday.
The outdoor group’s sales advanced 12.3 percent to $1.92 billion in the quarter, accounting for 58.3 percent of corporate revenues, while its operating income was up 11.2 percent to $358.2 million. In the process, The North Face, VF’s largest brand, topped $2 billion in sales for the year, and Vans leapfrogged over Wrangler to become the firm’s second-largest brand with sales of $1.7 billion. Timberland, with sales in 2012 of $1.5 billion, is the third unit of the outdoor coalition with sales of more than $1 billion, while Lee and Wrangler share that distinction within the Jeanswear coalition. Lee is strongest in the midtier channel and Wrangler in the mass market.
Wiseman noted that The North Face grew 12 percent during the quarter while its direct-to-consumer component was ahead more than 30 percent. Direct-to-consumer revenues overall advanced to 22 percent of revenues from 21 percent in 2012.
In the final quarter of 2013, which ended Dec. 28, VF’s net income rose 10 percent to $367.7 million, or 82 cents a diluted share, from $334.2 million, or 75 cents. The quarterly earnings per share fell 2 cents shy of consensus estimates of 84 cents but 1 cent ahead of VF’s most recent guidance.
Led by the outdoor unit’s strong performance and even more rapid top-line growth in the Sportswear coalition, revenues grew 8.5 percent to $3.29 billion, from $3.03 billion, but again fell shy of Wall Street’s expectations for $3.34 billion on the top line. Sportswear sales were up 13.7 percent to $207.8 million in the quarter.
Jeanswear sales, pressured at the midtier and mass levels, were down less than 0.1 percent to $734.1 million while the Contemporary coalition’s sales were up 0.7 percent to $107.7 million.
Wiseman said that the better denim business, as represented by Seven For All Mankind in the contemporary unit, was challenged by the growing trend of women moving toward athletic apparel in much the same way they had embraced premium stretch jeans in 2011 and 2012. “It’s a trend,” he said. “We don’t know how long it will last but we do know it doesn’t mean the end of the better denim business at all.”
VF projected 2014 sales of about $12.2 billion and EPS of between $3 and $3.05. Analysts earlier had estimated $12.45 billion and $3.09, respectively.
For the year, net income grew 11.4 percent to $1.21 billion, or $2.71 a diluted share, while revenues were up 5 percent to $11.42 billion.
Asked for his reaction about a rare earnings “miss” for the firm, the largest U.S.-based apparel company, and the resulting decline in the stock, Wiseman had no regrets.
“We spent an extra $40 million [on advertising and promotion] building our brands late in the year,” he said. “We could have saved that money and had it drop to the bottom line. Meanwhile, we’re on track, right on our plan and right with our guidance.”
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews