The marriage of data and analytics — particularly at its Vans business — helped VF Corp. beat Wall Street’s first-quarter estimates, giving the company confidence to dive deeper on data as it contemplates other areas for growth.
In a telephone interview with chairman and chief executive officer Steve Rendle and chief financial officer Scott Roe, the two spoke about the company’s evolving use of data and customer metrics, as well as its new circular business pilot testing programs. Rendle also addressed briefly his personal views about the trade war between the U.S. and China.
According to Rendle, the company began incorporating consumer insights as “part of our toolkit about six or seven years ago.” Those research projects have evolved from major global undertakings that included interviews with consumers to “much quicker, almost real-time, interactions,” the chairman explained. He noted that as consumer information grows, the analytics component of the data engine can pick up on consumer trends and, more importantly, “what’s driving purchasing decisions.”
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Rendle spoke briefly about the intense focus in the last four months on the Vans loyalty program, which numbers 2.5 million consumers and continues to grow.
“That allows for one-to-one interactions and more personalized offers. We can then pull the information back into our decision-making for product [for later use] further upstream on how to better inform our merchandising decisions. It’s still an early area of investment,” Rendle said.
Roe said the analytical process was started with the Vans brand, and is now being used to reposition The North Face. The early read on Vans, and projections for growth from The North Face, has the company confident that it’s on the right track to give consumers what they want.
VF on Friday raised its outlook for fiscal year 2019, guiding the EPS range to $3.52 to $3.57 from prior guidance of $3.48 to $3.53. Revenues are now forecast at between $13.6 billion and $13.7 billion from a prior estimate of $13.45 billion to $13.55 billion. The raised guidance followed VF’s posting of first-quarter results — a net income gain of 45.9 percent to $160.4 million, or 40 cents a diluted share, on a 22.9 percent increase in total revenues to $2.79 billion for the period ended June 30.
The company last month introduced The North Face Renewed, a test program that refurbishes previously worn, returned, damaged or defective product. The items are inspected, washed and remade as renewed apparel, upcycled materials or recycled feedstock. Competitor Patagonia has a similar product. Because 85 percent of textiles produced end up in landfills annually, the pilot program helps minimize the impact on the planet and further aids VF in its sustainability efforts.
In the telephone interview, Rendle said the Renewed program isn’t the only one that VF is testing as part of what it calls the circular business model.
“We’re also looking at rental ideas and subscriptions. It’s our acknowledgment of where the consumer is going, and us putting the consumer at the forefront,” Rendle said. He explained that the programs are “small and not intended to be big revenue- or profit-drivers today.” The idea is to test, learn and understand whether there’s even a place for VF’s brands in those platforms. Rendle told Wall Street analysts during a conference call that consumers appear to “value quality over quantity. They’re looking for access potentially over ownership.”
Roe said of the circular business tests, “Some things we will do on our own. Being able to return, renew and resell we will do with our own model. As you go out into other platforms, such as rentals and subscriptions, those are likely through partnerships.”
Roe credited former chairman Eric Wiseman for giving company executives “the latitude to start thinking about the next phase of VF,” and how, when they started looking at what that evolution should be, they initially didn’t realize the growth potential of the workwear business even though the category was a “cash cow” for VF. The overall growth of the category changed following VF’s $820 million acquisition of Williamson-Dickie last year. Revenues in the Work segment are expected to increase more than 35 percent for fiscal year 2019.
As for the current headlines over the trade war between the U.S. and China, Rendle said of VF: “We support rule-based, transparent and fair business trade actions across all of our country partners.”
So far the company hasn’t been heavily impacted by the new tariffs. VF has a less than 15 percent exposure from the total imported from China, he said. Further, the company’s global supply chain is spread out across the world, a result of the decision to “de-emphasize China as a source for production for U.S consumption over the last several years.”
Personally, Rendle has doubts about apparel and footwear as category options for further taxation.
“Apparel and footwear are paying the largest tariffs for goods coming into the U.S. [In my opinion,] it’s hard to imagine how apparel and footwear can get tacked on [an additional amount] when it’s already highly taxed,” the chairman said.
Meanwhile, the company has a team on the ground in Washington, D.C., talking to senators and representatives. They are there serving as educators to inform Congressional members about what the textile supply chains entail so the elected officials can have a better understanding of the impact on business and on consumers.