VF Corp. has big plans for the next five years — but first it’s taking a step back with a profit warning for 2023 and a non-cash charge of up to $450 million against Supreme’s trademark and goodwill.
While the fashion giant — also parent to Vans, The North Face, Timberland and more — projects slower growth this year, in particular at Vans, its biggest and most profitable business, that weakness was presented as a temporary setback during its investor day in Denver, where company management laid out a five-year plan for VF to use its scale and savvy to keep taking market share.
More from WWD
VF also outlined something of its vision for Supreme, where it’s looking to expand while maintaining the brand’s ultracool factor.
Steve Rendle, chairman, president and chief executive officer, said the $11.8 billion company was “hitting on all cylinders” and that “we’ve never been more confident in our strategy.”
Still, investors were spooked and sent shares of VF down 6.9 percent to $32.66 on Wednesday.
Portfolio was front and center at the meeting — and VF is one of the more active portfolio managers in fashion, having jettisoned its Lee and Wrangler jeans businesses in 2019 and acquired Supreme in a $2.1 billion deal in 2020. That give and take has helped keep VF current, showing a willingness to keep up with the market (one of the areas where Vans is now actively playing catchup).
“We’re committed to continually shape this company,” Rendle said. “While we have one of our key brands that is not achieving its potential, every other one of our brands, the 11 other brands, are achieving at or greater than their commitments. We are deeply committed to growth.”
The company’s overall strategy has been more updated than changed — focusing in on a deep commitment to customers and then using its business platforms to drive growth.
VF, however, did get a new vision statement.
“We are committed to be the world’s most dynamic portfolio of deeply loved, iconic active-lifestyle brands,” Rendle said. “That vision has been born by a commitment to provide absolute clarity to our teams on who we intend to be, most importantly, the strategic investments that we’re prepared to drive behind. Every brand in this portfolio plays a very specific role, both strategically and financially to help us achieve our results.”
Those results — through fiscal year 2027 — call for revenues to grow at a compounded annual growth rate in the mid- to high-single digits, as earnings per share expand high-single to low-double digits, on a percentage basis.
Now that Supreme has been integrated into VF, the brand is set to start contributing more to growth.
Susie Mulder, who is global brand president of Timberland, and the company’s liaison to Supreme’s management, noted that the brand is “100 percent direct-to-consumer” and available in 40 countries through 14 flagships and three owned websites.
(VF plans to take a $300 million to $450 million non-cash charge on Supreme’s trademark and goodwill in the second quarter, which is not tied to the brand’s business or operations but to “a triggering event that is the result of higher interest rates and foreign currency fluctuations, which are expected to negatively affect the estimated fair values”).
“We often get the question, ‘What is the Supreme business model? What makes Supreme Supreme?’” she said. “I’m going to try to explain that in one slide.”
That slide simply described the brand as authentic, scarce, global and agile.
“Unlike many businesses, Supreme is global, each season we produce one product assortment globally, it’s identical in every market and it creates a shared experience across the worldwide community,” she said.
And that community is going to be seeing more of Supreme, which is going to start spending on brand building and plans to double its 2020 footprint over the next five years with a “grow wide” strategy.
That started with news that Supreme would open a store in Chicago as well in Dover Street Market in Beijing.
But Mulder said Supreme would stick to its knitting while evolving and growing.
“This is a brand that always listens to culture and, as we know, culture is moving,” she said.
As Supreme and VF’s other brands chart growth for the future, there’s some tough terrain on the nearer horizon.
VF said its second-quarter results are coming in lower than expected and revised its outlook for this year. Total revenue is expected to be up 5 percent to 6 percent in constant currencies, instead of the at least 7 percent gain seen earlier. Vans’ revenues are now seen down mid-single digits as opposed to the mid-single digit projected earlier.
And adjusted earnings per share are seen at $2.60 to $2.70 this year, down from $3.18 last year and the prior outlook of $3.05 to $3.15.
Kevin Bailey, who is global brand president at Vans and returned to the business earlier this year, told analysts the brand was refreshing, refocusing and accelerating.
Bailey said the brand — which grew from $2 billion in sales in 2017 to $4 billion in 2019 — had failed to keep up with the youth culture it caters to and relied too much on its classic looks.
“Vans is far from done in our growth potential,” Bailey said. “We are rooted in youth and skateboarding. We are refreshing our strategy now to grow and expanding beyond those perceptions.”
He noted that surf and snow are also important and, along with skateboarding, are set to get a boost now that they’re all part of the Olympic lineup.
Apparel is also going to be getting more attention, building to a big launch for next fall, Bailey said.
While the meeting was largely upbeat and focused on the future of VF, it started on a dour personal note with Rendle acknowledging the passing of The North Face team captain and ski mountaineer Hilaree Nelson, whose body was recovered Wednesday morning after a fall in Nepal earlier this week.
“It is a hard day, it’s been a hard last couple days,” said Rendle, noting analysts at the meeting would pick that up from The North Face employees at the meeting. “Hilaree was really our superhero and she provided so much passion and so much energy that we drew from. We’re sad and the grieving begins.”