Steve Rendle is keeping an eye on the horizon — even if the path is a little bit rocky right now.
“We’re on track to deliver a really solid year,” said Rendle, chairman, president and chief executive officer of apparel giant VF Corp., in an interview with WWD after the company reported third-quarter results Thursday that left Wall Street wanting more. “Year-to-date results are at the high-end of our long-range plan.”
But the quarterly report itself was uneven. Vans was up, but Timberland was down and the outlook for the full fiscal year ending in March was cut. Having pushed the stock to its highest level ever this month — over $100 — investors reversed course and sent shares down 9.7 percent to $85.40 Thursday, leaving the firm with a still-substantial market capitalization of $34.1 billion.
Scott Roe, executive vice president and chief financial officer, said the stock market is simply volatile, both going up and going down.
“Everyone runs one way and then they run the other way, we try not to get too focused on that,” Roe said.
What Rendle and Roe are focused on is moving VF into the future, so smoothing over the rough areas in the business today while prioritizing the search to add brands to its portfolio, settling in in Denver and figuring out how to build a purpose-driven and eco-friendly fashion giant.
They’ve been busy so far, spinning the Lee and Wrangler businesses into Kontoor Brands, moving the headquarters from Greensboro, N.C., and, most recently, putting business-to-business workwear businesses on the block this week.
But in the third quarter, the market was promotional in the U.S. while Timberland’s men’s business was weak and the North Face women’s business under performed.
Overall, net income was flat at $465 million, or $1.16 a diluted share, although adjusted earnings per share from continuing operations increased 14 percent to $1.23, ahead of the $1.21 analysts projected on average.
Sales for the three months ended December rose 5 percent to $3.38 billion. Revenues from continuing operations rose 6 percent.
The Vans business drove sales up 12 percent while The North Face was up 8 percent and Timberland fell 5 percent.
VF is now looking for full-year revenues to increase 5 percent to $11.75 billion, instead of the $11.8 billion projected, and adjusted EPS of $3.30, down from the $3.32 to $3.37 previously projected by the company.
The company has become a powerhouse by building strong, multifaceted brands with a portfolio now focused around an active lifestyle.
The North Face, for instance, has a mountain sports component made for climbing and mountaineering, a mountain lifestyle tier and an urban exploration side that brings a dose of the great outdoors to the city. Last year, the brand also introduced its FutureLight performance fabric, which is starting to drive sales gains.
And behind the scenes, it’s brand office moved last year from San Francisco to temporary offices in Denver.
“As we transitioned from one city to another and you uproot people’s lives, the families, the kids, that’s a distraction,” Rendle acknowledged. “It’s a worthy distraction that all of us went through.”
About half of the staff made the move, with also has also brought about gains. “This is an opportunity to upskill and bring in new talent, new ideas that help move us down this path more quickly,” the ceo said.
And Rendle wants to keep pushing forward.
Acquisitions are the company’s top priority when it comes to capital allocation.
“Valuations are on the high end and I think the M&A market is rather active,” he said, noting the company is still eyeing active, outdoor and ath-leisure brands that could be a good fit.
“We’re looking for leading brands in that addressable market that have a very unique way to connect with consumers, drive a high level of experience,” Rendle said. “That’s where you create that long-term value. It’s about those brand experiences and how they engage.”
Rendle is working to engage too and connect with employees, consumers and suppliers in ways designed to serve both the needs of the environment and people wishing to live an active lifestyle.
“This is not a top-down edict, it was really a bottom-up edict that our people helped craft,” Rendle said. “You motivate people from the bottom up, it’s really our employees pushing up.”
And in turn, the company’s business model is being pushed.
Rental, for instance, is on the radar.
“There’s a part of our business perhaps you don’t need to own, you just need access,” Rendle said.
VF’s North Face and Kipling brands have held some small rental tests over the past year or so.
“It’s really test and learn before you really double down and look to scale,” he said, noting it might not make sense for people to buy gear for their annual ski trip or own luggage they use only occasionally.
Count that as another sign VF is on the move.