Last September, Eric Wiseman closed the biggest deal in VF Corp.’s 113-year history, acquiring The Timberland Co. for $2.3 billion. The purchase added $1.6 billion in annual sales to VF’s top line, pushing total revenues to $10 billion and making it the largest apparel manufacturer in the world.
This story first appeared in the March 19, 2012 issue of WWD. Subscribe Today.
Wiseman, chairman and chief executive officer of Greensboro, N.C.-based VF, calls the acquisition “transformative,” as it gives the group a major boost in global footwear, as well as a big jump on its five-year plan, outlined last March. The deal further cements VF’s transformation into a portfolio of powerful lifestyle brands—including The North Face, Vans, Nautica and Reef—many of which are anchored in the dynamic outdoor and action sports space.
“We thought there were a lot of things we could do to help Timberland achieve its potential, and we thought there were things Timberland could do to be helpful to VF,” says Wiseman, 56, who has helmed the company since January 2008.
High on the list of VF’s priorities is a revamp of Timberland’s apparel offerings, now that it has cut ties with the brand’s former apparel licensee, PVH Corp. “Apparel has not worked for Timberland through the various models they have chosen to create,” points out Wiseman.
VF also believes it can improve efficiency at Timberland’s 215 stores. “They don’t hit the financial metrics that our stores hit,” says Wiseman. In addition, VF expects to enhance Timberland’s back-end inventory planning and supply-chain operations. Conversely, Timberland will bring to bear its six-decade history in the footwear category and industry-leading expertise on sustainability to VF’s other businesses.
The Timberland deal capped off a winning year for Wiseman, who is one of the highest-riding apparel ceo’s in the marketplace these days. In the midst of a volatile global economy, VF’s diversified business model has allowed it to pour resources into, and grow sales in, high-potential areas—like outdoor brands, Asia and Northern Europe—which offsets slackness in slower-growing businesses and regions, such as jeanswear and Southern Europe.
In 2011, the company reported record revenues, record earnings and record cash flow from operations—with its share price rising more than 60 percent in the last year and stock now trading near its 52-week high.
As part of its five-year plan, VF has promised to boost revenue $5 billion by 2015 to $12.7 billion, and add $5 in earnings per share, bringing it to $11.50. So far, the company is ahead of plan on both counts, and on schedule to open 700 stores by 2015, which would bring its global store count to 1,500.
For the three months ended Dec. 31, 2011, VF’s net income advanced 375 percent to $257.3 million as total revenue jumped 37 percent to $2.91 billion, with the Timberland acquisition adding $549 million to that figure. Excluding Timberland, organic revenue growth in the quarter was 11 percent. This year, VF expects to grow revenues by 15 percent.
With the Timberland transaction, more than half of VF’s revenues come from its outdoor and action sports coalition, which is now the prime growth engine for the company—a far cry from its roots as a purveyor of lingerie and underwear for much of its history, which dates back to 1899.
VF made the strategic decision in 2004 to focus its resources on outdoor and action sports, where technical innovation, performance features and a vibrant lifestyle appeal made margins and valuations higher than its legacy innerwear and jeanswear businesses. “We looked at what segments of the apparel and footwear industry had superior growth rates and superior profitability rates and really strong, differentiated positions,” says Wiseman.
The North Face and Vans are the dual pillars of the coalition, and together account for 75 percent of its revenues. The North Face is predicted to add $1.5 billion in incremental sales by 2015, becoming a $3 billion brand by itself. Vans is expected to add $900 million in incremental sales, while Kipling and Napapijri combined will add $300 million, and Eastpak, Lucy, Eagle Creek and Reef will add another $300 million to the coalition.
The North Face is VF’s highest-margin brand, and activity-based brands have been gaining share of the consumer wallet and floor space at retail, said analyst John Kernan of Cowen and Company. However, the category is becoming more competitive, with rising players such as Lululemon and Under Armour gaining ground. There’s also the risk that The North Face and Vans could dilute their authentic brand appeal by expanding ever-larger.
Wiseman is well aware of this. “If we weren’t consciously managing that risk, it would be scary to me, but I know that we are, every single day,” he says. The company’s strategy is to maintain each brand at the pinnacle of its respective categories by offering the most technically advanced and lifestyle-resonant gear and apparel to the hard-core professionals that provide a halo to each brand.
That mission is aided by robust investment in consumer research, which has long been key at VF—oftentimes making it more akin to a packaged-goods company like Procter & Gamble than to other apparel makers. “The company’s approach to brand management allows each brand to remain true to its core while applying rigorous behind-the-scenes marketing science, financial discipline and operating leverage,” notes analyst Robert Drbul of Barclays Capital.
In Europe, for example, VF is investing heavily in research across markets for The North Face to measure areas of opportunity in various countries vis-à-vis its competitive set, which tends to differ in each country. “We know where we stand against each brand in each country,” says Wiseman. “I’m not just talking about market share. We’re measuring awareness, we’re measuring consideration, whether they’ve purchased each brand in the last 12 months and which brand they buy most often. It lets us know where we miss people along the way and where other brands miss people along the way. It helps us tailor our brand investment to solve for the opportunity in that market.”
The company’s reliance on research goes back to its roots as a mass market purveyor of intimate apparel, with previously owned brands like Vanity Fair, Lily of France and Vassarette. “We specialized in reaching masses of consumers in the big boxes. Having a strong quantitative orientation made all the difference in the world to your productivity at Kmart or Wal-Mart or Penney’s or Sears or Kohl’s,” explains Wiseman. “That’s kind of in our DNA.”
The same sort of approach applies to VF’s blueprint for acquisitions, which is guided in part by research. “We do a lot of consumer-insight work around brands and around industries on an ongoing basis here—about brands that we own and brands that we don’t own,” says Wiseman.
Reports have abounded that VF is seeking to unload the John Varvatos brand, which it bought as part of the Nautica acquisition in 2003. More recently, in January, reports surfaced that VF took a look at Norwegian outerwear maker Helly Hansen. “We are always looking at selling companies and always looking at buying companies at any moment in time. I’m active in those discussions 52 weeks out of the year,” says Wiseman, declining to elaborate specifically on John Varvatos or Helly Hansen.
With sales now topping $10 billion a year, the size of ideal acquisitions has increased to companies with sales of about $400 million to $500 million annually. “Our focus has to be something that will move the needle for us,” points out Wiseman, adding that with the Timberland acquisition to digest, VF is not actively hunting for new deals—although it is listening to incoming pitches.
For a company predicated on business prescience, however, VF has been slow to ramp up its e-commerce initiatives. “Clearly our business was underinvested five years ago in e-commerce. We underestimated the potential,” admits Wiseman.
By 2015, e-commerce revenue across all brands is expected to triple, reaching nearly $400 million in total sales. By comparison, VF was doing only $17 million in online sales in 2007. “We passed $100 million in 2010, but we are underdeveloped in the U.S. in every benchmark,” says Michael Gannaway, vice president of VF Direct and Customer Teams.
As with its retail stores, e-commerce is also a marketing opportunity for each brand, not just a sales channel. “We are really focused on having a digital relationship with consumers that allows people to really understand what the brand is about,” says Wiseman. “Five years ago, we were just thinking, ‘Let’s go out and sell stuff over the Internet.’ ”
China is a key e-commerce target for VF brands, as Chinese consumers have strong interaction with brands via mobile devices. Europe presents more of a challenge due to the fragmented markets there.
In total, VF’s international markets are slated to grow 15 percent annually over the next five years to $4.6 billion in sales, from $2.3 billion last year, with Asia the fastest-expanding region. By 2015, 40 percent of total revenue should come from international markets. VF believes China is likely to become the world’s largest market for apparel and footwear, eventually overtaking Europe.
VF launched in China in 1995 with its Lee denim brand, which proved to be a difficult but, eventually, fruitful foray. “The first seven years were painful. We invested in the Chinese platform for seven years in a row, which is my way of communicating that we lost money seven years in a row. Substantial amounts of money,” recalls Wiseman. “But over the past 17 years we have built platforms through a very long learning process that we are now leveraging to rapidly launch other brands.”
VF’s biggest Chinese brands are now Lee, The North Face, Vans, Nautica and Kipling. Secondary brands in their initial growth phase in the country are JanSport, Reef, Seven for All Mankind and Napapijri. Using the platform pioneered by Lee, VF now has sales and distribution offices set up in every major Chinese city and local partners in the more remote provinces.
Wiseman knows international markets well. While he assumed the top job at VF four years ago, Wiseman first joined the company in 1995, when he left a 17-year-career at Sara Lee/Hanesbrands to become executive vice president of JanSport. Doing so meant ending his four-year stint living in Australia as president of Sara Lee Intimates, Australasia, to move to JanSport headquarters in Appleton, Wisc.
“I was not somebody who knew when they were 12 years old that they wanted to work in the apparel business at all,” acknowledges Wiseman. “But I developed a love for the industry, and hence I’ve been in it for my whole adult life.”
Wiseman was born in 1955 in Malvern, Pa., outside of Philadelphia. He attended Wake Forest University in North Carolina, where he studied business, and later earned an MBA there in 1988. After graduating from college in 1977, he waited tables for a year in the area, in order to be near his girlfriend, Susan, who is now his wife and mother of their two grown children. He got his first apparel-industry job offer from legwear-maker Kayser-Roth Corp., where he stayed for less than a year before joining Sara Lee.
Upon joining VF, Wiseman’s ascent of the corporate ladder was brisk, due in part to the support of former VF chairman and ceo Mackey McDonald. In 2000, Wiseman was named vice president and chairman of VF’s global intimate apparel coalition, which was subsequently sold off. In 2003, he was tapped as chairman of the newly formed sportswear coalition, where he oversaw the integration of the Nautica Enterprises acquisition.
The following year, Wiseman was elevated to vice president and chairman of VF’s outdoor and sportswear coalition, where his portfolio expanded to include The North Face, Vans, Reef, JanSport, Eastpak, Kipling and Napapijri. In 2005, Wiseman was named executive vice president, global brands, and in 2006 was promoted to president and chief operating officer of VF. In January 2008, Wiseman assumed the ceo role upon the retirement of McDonald, and the following August he got the chairman title.
“I came to work every day, and I wasn’t late often,” jokes Wiseman of his rise at VF, while also tipping his hat to McDonald.
As ceo, Wiseman spends most of his time on two key areas: strategy and resource allocation. “Strategy is how you are thinking about the future, why you believe that to be true, and what the resources, people and money you need to achieve your strategy are,” explains Wiseman, who also sits on the boards of Cigna Corp. and Lowe’s Companies. “The money part is easy. It’s the people part that’s the hard part.”
Winning is an important aspect of VF’s corporate culture—but so are teamwork and selflessness. “We are intensely competitive people externally but somehow we manage internally to have a culture of cooperation and support,” maintains Wiseman. “This is the kind of company where what you accomplish matters—but how you accomplish it matters just as much. We have very strong values around integrity and loyalty and respect. If you don’t have those things in your DNA, you should never want to come to work here.”
Another key element of the VF corporate culture is a tolerance for failure. “I’ve had a lot failures during my 16 years here,” admits Wiseman, though he declines to get into specifics. “But I would always be the person to bring up the fact that what we were doing wasn’t working, and it was also my responsibility to get it right. That’s part of our culture here. We have an amazing patience for people to learn through their mistakes.”
A desire to learn—as well as teach—are defining aspects of Wiseman’s personality. “I’m a really curious person, and I think it’s one of the most important attributes to my job,” says Wiseman. “I know that at every one of our businesses there are people working there who know more about their business than I do. And I’m really anxious to know what they know and then add my perspective to it, from a distance.”
Wiseman periodically teaches leadership seminars for midlevel VF managers around the world. The most critical advice Wiseman gives his executives is to manage time wisely. “Focus your time, thoughts and energy on the few things that really matter and have the discipline to regularly evaluate what those things should be,” says Wiseman. “All of us have jobs where we have more input than we can possibly manage. If you focus your time and energy on the few things that really matter, then the important stuff gets done and the inconsequential stuff doesn’t. And that’s okay.”
Wiseman himself gets things done using an 80-20-80 plan: 80 percent of his time on the 20 percent of VF’s businesses that represent 80 percent of the company’s future.
Another goal of Wiseman’s is to inspire the people around him. “If you can inspire people to achieve their professional potential, it’s not about managing them, it’s not directing them. It’s about creating an environment where they are truly inspired to achieve greatness, and then you’ll win,” he notes.
Wiseman fosters an accessible, unfussy work environment and wears jeans to the office every day. He diplomatically rotates between VF brands.
“I’m really informal. I’m not a believer that you should have a work personality and a home personality,” he explains. “I don’t have the energy to manage two personalities, so I limit myself to one. I always thought it was an incredible waste of your life to go to work every day and not be yourself.”
The last piece of Wiseman’s workplace success puzzle? Having fun. “I spend too much time here, so if I didn’t have fun here, I probably wouldn’t have much fun in my life,” says Wiseman.
When not in the office, Wiseman doesn’t golf, preferring walks and hikes. “I’m an outdoor person by nature. My whole life, I’ve spent a disproportionate part of my time hiking on trails,” he says. “A six-hour hike on a Saturday along a beautiful trail in the mountains, I’m completely into that. And I’ve gotten an enormous collection of things to wear in the woods.”