Vans parent VF Corp. said it’s headed in the right direction with the footwear brand. The ETA on when it reaches its turnaround destination remains unclear.
Last week VF Corp. recapped results for its fiscal first quarter ended June 29 as CEO Bracken Darrell laps a year in the top spot.
Companywide revenue of the multi-brand portfolio owner totaled $1.9 billion. That’s down 8 percent, excluding the impact of exchange rates. VF’s net loss widened to $258.9 million from $57.4 million a year ago. The loss includes a $145 million impairment from Supreme.
“It’s been a full year of transformation and I believe the pace of change won’t slow going forward,” Darrell told analysts. “This is the new norm at VF and it’s exciting.”
VF announced in July the sale of Supreme on Darrell’s one-year anniversary, amid activist investor calls for the company to show it means business in righting its financials.
Supreme’s $1.5 billion sale to eyewear conglomerate EssilorLuxottica was seen as a way to help VF pay down debt, a key strategy of the “Reinvent” turnaround introduced last year.
The sale is a black eye in VF’s M&A arm, with the company paying $2.1 billion in 2020 for the New York skate and streetwear brand.
Supreme scaled on a model of limited-run items that created scarcity.
VF ultimately could do little with such a brand, given its expertise at growing businesses through new categories, stores and distribution.
Darrell said as much in a July statement announcing the sale, pointing out Supreme’s “distinct business model and VF’s integrated model” offered “limited synergies” between the two.
The deal is expected to close at the end of the current calendar year.
On Vans
It’s the progress on Vans’ business that’s central to VF’s turnaround.
VF earlier this year tapped Sun Choe to serve as global brand president of the footwear firm. She’s one of eight new direct reports in the past year for Darrell (out of 11 total).
Choe’s work is cut out for her.
Vans’ June quarter revenue tanked 21 percent to $581.8 million. VF called it a “modest improvement” from the prior quarter.
It marked the ninth straight quarterly decline. The last time the Costa Mesa-based business grew year-over-year revenue was in the quarter ended Jan. 1, 2022.
Darrell said specifics on plans for Vans would be saved for future quarterly updates.
However, he allowed: “I expect you’ll see more of the same,” pointing to new marketing around product releases.
The company’s newer lines, UltraRange and Knu Skool, now rank in the company’s top five, which Darrell offered as an indication of “how responsive we are to new products when we think they’re right.”
Vans has also “completely revamped” its marketing strategy, the CEO said.
He described a ramp in “energy” at Vans that includes product placement on celebrities, the launch of the “Always Pushing” campaign and grassroots marketing.
Much of Darrell’s recap mirrored past commentary on the business: Vans “lost the energy” and got “over rotated on a couple of styles.”
Based on what has been repeatedly underscored, new styles, new marketing and refined distribution (with store closures and pulling out of discounters) are expected to lead Vans out of the doldrums.
In the future, there’s potential to grow Vans apparel. The category accounts for 19 percent of the business and Darrell called out a “big opportunity” there, but not something for the near term.
Done with Clean Up?
Unloading Supreme was the result of a portfolio review. One analyst last week questioned whether there would be more divestments.
“We don’t have anything specific contemplated, but I don’t think we’re ever really done in terms of reviewing our portfolio,” Darrell said.
The question comes as VF’s Big Four brands – Vans, The North Face, Timberland and Dickies – were all challenged in the June quarter.
Even bright spot The North Face, slipped 2 percent in constant currency to revenue of $524.2 million.
Timberland revenue was off 9 percent to $229.4 million. Dickies fell 14 percent to $116.8 million.
Darrell blamed an ill-fitting strategy for Dickies, focused on playing up its fashion offering for its problems: “We moved too fast to try to turn it into a pure fashion brand here in the U.S. And then we really pushed to make it a pure fashion [brand] outside of the U.S.”
That play has been “doing fine” overseas, the CEO said. The struggle has been domestically.
In fact, the move to capture more of the fashion consumer’s dollar alienated the brand’s core, workwear customer.
Darrell said Dickies has now “refocused completely” on workwear.
“I think Dickies is a fantastic brand and a great business,” he said. He assured analysts the brand is “strong” and “solid,” and reiterated a theme that’s been said of the broader business’ turnaround: “It will just take time.”
Be First to Comment