Sales declines are mounting for Costa Mesa-based Vans as parent VF Corp. confirmed Tuesday its entire brand portfolio is under review as part of its turnaround plan.
Vans, seen as key to the overall VF turnaround, had sales drop 29 percent in constant currency to $668.2 million in the quarter ended Dec. 30. The results mark the fourth straight quarter of double-digit declines at Vans and the seventh consecutive quarter of sales contractions.
“At Vans, the decline looks like it did last quarter by the numbers but, underneath, there’s a lot changing,” VF President and CEO Bracken Darrell told analysts Tuesday afternoon.
He outlined what Vans will focus on, with few specifics. Darrell said that’s due to the possibility of some plan aspects changing, given a new global brand president will be hired. The CEO currently oversees Vans while the executive search for a brand president continues.
New marketing, a new product roadmap and “clear brand purpose” were all cited as areas of focus.
Darrell said Vans’ issues stem from taking its eyes off the core youth consumer as it gained traction between 2015 and 2020 with more mainstream shoppers. As a result, the company, stopped innovating and churned out new colorways of “the same old things,” Darrell said.
Cutting prices and expansion into more discounters didn’t help.
A series of new styles will now be released over the next few years, with an aim to regain relevance in the youth market.
“This [new strategy] is in place. We have a map back to growth for Vans,” Darrell said. “I’m not ready yet to commit to when the brand will return to growth, but it will.”
VF Strategic Review
Vans, one of Denver-based VF’s largest businesses, has led the drag on the company’s overall results for several quarters. It prompted Darrell, who joined the business in July, to announce a corporate-wide turnaround plan in October called Reinvent.
The next step in that plan is the strategic review now underway across VF’s brand portfolio. Darrell alluded to as much last year in saying there are “no sacred cows” when fielding questions about whether the company would consider placing other brands besides its backpacks business on the sales block.
“This [strategic review] is the next natural step in our turnaround plan,” he said Tuesday. “We’re objectively assessing what fits and what doesn’t as we look to reshape our business toward the greatest opportunities for near- and long-term profitable growth and value creation.”
Darrell confirmed the review will not result in a “largescale realignment” of the VF brand portfolio. However, when asked the question of whether the three largest brands are excluded from the review, he declined to answer.
“We’ve been very explicit about saying we’re not going to address … any question about that,” Darrell said. “We meant it when we said, ‘no sacred cows’ and are really taking an objective look at all the brands.”
Vans, The North Face and Timberland are the three largest brands on a revenue basis. VF also owns Dickies, Supreme and several backpack brands.
At this time, no banks have been hired as part of the review process.
Disappointing All Around
Although much of the discussion around VF’s turnaround has focused on Vans, the December quarter was a disappointing one all around. Pressure in the Americas business, fickle weather, a cybersecurity incident in December and continued softening among retailers drove the declines.
The North Face sales fell 11 percent to $1.2 billion on account of warm weather and broader struggles in the outdoor market with excess inventory and over promotion.
Timberland, which debuted a buzzy Louis Vuitton collaboration last month, saw sales dip 22 percent to $473 million. Dickies sales were off 17 percent to $147.9 million. The rest of the company’s brands, which includes Supreme, were down a collective 7 percent to $479.1 million.
“Q3 was a particularly disappointing quarter,” Darrell said.
On a more positive note, he said the company is making progress on reducing its debt and inventory levels.
VF revenue totaled $3 billion in the December quarter, down 17 percent. The company was in the red with a net loss of $42.5 million, compared to net income of $507.9 million a year ago.
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