After shedding its staid denim and outlet business earlier this year, a leaner VF Corp. is betting that its powerhouse brands, Vans and The North Face, can deliver for shareholders.
Speaking at the group’s investor conference in its new Colorado home, Steve Rendle, VF’s chairman, president and chief executive officer, revealed its intentions to return $10 billion to shareholders through dividends and share repurchases by 2024.
“We’re deeply committed to our shareholders in delivering shareholder return,” he said.
This will be driven by a strong set of financials, with earnings per share forecast to increase at a five-year rate of between 12 percent and 14 percent.
Revenue, meanwhile, is expected to grow at a five-year compounded annual growth rate of between 7 percent and 8 percent on the back of its strongest brands, which also include Timberland and Dickies.
“The past two and a half years represent one of the most transformative periods in VF’s 120-year history,” added Rendle. “We’ve emerged with a sharpened focus on what’s required to become even more consumer-minded and retail-centric. With greater clarity to the opportunities ahead, we’re confidently updating our five-year strategic growth plan and financial outlook.”
In particular, Rendle has big plans for Asia growth, stating that its business is “incredibly important.” He is one of the few executives in retail who hasn’t been overly concerned about the escalating trade dispute between China and the U.S., despite the latter slapping 15 percent levies on a large tranche of Chinese imports of apparel and footwear.
Just a few years ago it would have been a different story, but the company has worked hard to diversify its supply chain and now only 7 percent of U.S. merchandise is produced in China.
Fueling the growth in China will be Vans, which Rendle believes can continue to expand its footprint in the country as it has proven in the past that its popularity can rise above political pressure.
Vans is certainly performing well, with its global brand president Doug Palladini, who also spoke at the investor day, detailing that the brand is on track to pass through the significant $4 billion revenue mark this year.
This, however, is just “scratching the surface” of what Vans is capable of, thanks to its resurgence in popularity with young shoppers, according to Palladini.
“Youth culture is our muse and will always be our muse,” he said.
As part of his plans to continue to boost revenue, Palladini will focus on shifting Vans from being viewed as solely a footwear label to a footwear and apparel brand.
In addition to China, VF also has M&A at the top of its mind, with Rendle telling investors that it was the “number-one place where we will apply our capital” and that it now has a much sharper focus on where its portfolio should move in the future. “It’s a powerful way for us to access new growth vectors,” he said.
As for VF’s denim business, it was spun off into a publicly traded entity called Kontoor Brands Inc. in May. While VF has relocated to Denver, Kontoor, whose brands include Wrangler and Lee, will remain in Greensboro, N.C., and will be run by a separate dedicated management team led by Scott Baxter, who can focus on capturing a bigger slice of the resurgent denim market — a category that is bouncing back after some tough ath-leisure competition.
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