NEW YORK — VF Corp., faced with relatively flat business in its core moderate jeans market, is pegging the future on the acquisition of lifestyle brands.
Robert Shearer, chief financial officer of the Greensboro, N.C.-based company, offered people attending the eighth annual Lehman Bros. Retail Seminar in New York on Wednesday an overview of VF’s strategy a day after it reported an 18.3 percent rise in first-quarter earnings.
“You’re going to see more focus on lifestyle brands,” he said. “Consumers aren’t looking for another apparel product to put in their closets…they’re looking for something that’s different, something that’s unique and something that shows innovation.”
Shearer cited VF’s acquisition of Vans and The North Face as examples of companies that had “authenticity” in their markets. He said VF has embarked on an effort to add 10 to 15 lifestyle brands to its portfolio in the next five years.
The strategy appears to be paying off. Acquisitions helped the firm’s outdoor segment to first-quarter sales that more than doubled to $282.3 million.
Jeans sales during the first quarter slipped 0.2 percent to $706.7 million, or 45 percent of total revenue. Shearer emphasized that the highly visible premium and superpremium categories are a sliver of the overall jeans market, which as a whole remains largely stable, leading VF management to anticipate marginal growth.
“We’re expecting 3 percent growth on a very large business,” he said.
However, the company’s middle market and mass market jeans segments — with brands that include Lee and Wrangler, as well as Earl Jean at the high end — will be facing pressure from rising energy prices, which eat into consumers’ disposable incomes, and the consolidation of some of its biggest customers — Sears and Kmart, and Federated and May department stores.
“The big are getting bigger,” Shearer said. “We obviously need to succeed with those large retailers.”
During the Tuesday call, Mackey McDonald, VF’s chairman and chief executive officer, said it was too early to assess the impact of the mergers on VF’s jeans business.
“The real question mark about this second half of the year relates to the consumer takeout of apparel at retail,” he said.
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