A less than exciting quarter for VF Corp.’s Vans has some wondering if the cool kids will be donning the skate shoe brand come back-to-school as marketing around the key selling season heightens.
Vans weighed heavily on VF’s results in its fiscal first quarter ended June 27 with the shoe brand’s revenue down 9 percent, excluding the impact of currency, to $459.8 million. While the bright spot was the Americas direct-to-consumer business, the largest for the Costa Mesa-based company, it’s Vans wholesale that continues to smart from a black eye.
VF President and CEO Bracken Darrell bluntly said in a conference call with analysts Wednesday wholesale “continues to be a lot weaker” than direct-to-consumer.
But according to Darrell the business turnaround is going according to plan.
That is, Vans would first worry about making its own e-commerce and company-owned stores better first given it has full control of that segment before seeing the wholesale channel improve.
The thought now is in the back half of VF’s fiscal year, wholesale is “going to be a lot better around the world,” the CEO said.
That would be on account of what Darrell told analysts is “much better visibility” into retailers’ “plans.” Currently, the executive suggested there’s “some destocking that’s going on, probably ahead of stores buying new inventory.”
It’s unclear what the exact plans are driving the projection of a “strong turn” for wholesale in the back half of the year. He declined to get into order book specifics.
Return to the Peak?
Even with management’s upbeat attitude about the shoe brand’s progress, a return to Vans’ heyday around profitability is not the goal.
Darrell said as much on Wednesday when asked if the business’ profitability would return to its peak and that the answer is “probably no.” He went on to say an over 20 percent operating margin is “probably too high for a business like that. We’re not going to do that.”
“I think we’ll see the profitability get to a really attractive level over the next several years,” Darrell said. “Probably not back to where we were five years ago.”
For reference, VF’s then-Active segment for which Vans made up the majority of the business, had a profit of $979.7 million in fiscal year 2022 ended April 2, 2022. Active at the time also included the packs business, which was sold in 2023 and included brands such as JanSport and Eastpak.
That Whole Premium Discussion…
In previous quarters, the executive team touted Vans’ movement into the luxury world. In fact, premium was played up as being a potential overall lift for the business.
That’s still being talked up.
Now VF is being asked how Vans leverages that.
The company won’t resort to raising prices, although Darrell said that’s “certainly always an option.”
“What we really are doing, though, is trying to move our mix a little higher,” Darrell went on to say. “You’ll see us emphasize more premium styles, not only collaborations, but in our own premium styles, and then make sure we’re delivering growth.”
That’s an easier sell in direct-to-consumer where Vans controls in-store presentations and pricing. It’s a different story at wholesale.
But Darrell recognizes it needs to go there when he told analysts that the brand has not differentiated itself enough at wholesale.
“We’ve tended to have the same kind of product in wholesale that we’ve had historically, whether its black-and-white Old Skools or checkered slip-ons,” he said. “We really need to make sure we’ve got refreshed product. We have some of that in wholesale, but not nearly enough. That’s going to start to come.”
It’s hard to know if that strategy works out from an earnings perspective.
At the mass level, the consumer expects stores’ assortments to shift seasonally with the arrival of new trends. Refreshed product is expected. At specialty shops, such as skate or surf retailers—who make up the bulk of the Vans identity—there’s nothing wrong with carrying the classics season after season as long as there’s consistency of quality and pricing.
A consideration for management would be whether channel differentiation is part of the playbook as this drawn-out turnaround marches on.
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