Dive Brief:
- VF Corp. is launching a transformation program meant to bolster its brand building, execution and sales in North America after reporting a 2% decrease in revenue to $3 billion in its second quarter earnings Monday.
- The plan also involves accelerating a turnaround of the Vans brand, including naming a new president for the segment. Vans experienced a 21% drop in sales, which impacted VF’s earnings in the Americas. VF sales in the region were down 11% overall, or down 3% excluding Vans.
- VF has faced increasing pressure from activist investors who earlier this month demanded it cut costs by more than $300 million and revamp its board leadership. VF later named a former Nike executive to its board.
Dive Insight:
Bracken Darrell, a former Logitech executive who became VF’s CEO in July, said in the release that during his first 100 days at the helm he had “developed even stronger conviction in the company’s significant potential, which is far greater than what we are delivering today.”
Despite the company’s changes, North Face brand experienced 19% growth to $1.1 billion. VF’s other large brands, Timberland and Dickies, declined 6.8% and 8%, respectively.
Alice Price, an apparel analyst for GlobalData, said in emailed comments that North Face has been helped by sustained demand for outdoor sportswear, which also plays well for streetwear shoppers. The other brands, however, don’t have the same effect.
“VF Corp can attribute these declines to its failure to align with new trends and aesthetics, with Vans in particular remaining out of touch with consumers’ latest trainer preferences, leading it to appear outdated and unfashionable in the eyes of discerning young shoppers,” Price said.
Vans has made some efforts to regain relevance, including plans to phase out its Vault line by the end of this year to make way for a new high-end category, OTW by Vans.
VF withdrew its previous revenue and earnings guidance for its 2024 fiscal year, which had suggested sales would be “modestly down to flat.” Instead, the company’s new guidance stated that Vans’ performance wasn’t expected to improve in the second half of the year and a more difficult wholesale environment in the U.S. could impact revenue and profit negatively.
VF’s transformation program Project Reinvent, calls for a new president for the Vans segment. Kevin Bailey, who currently holds the role, is stepping down and will remain on the executive leadership team. Darrell will take a “more active role in leading the brand and delivering its turnaround strategies” in the interim while an external search for a new president is underway, per the release.
“Though this is a good starting point for reviving the brand, the person to fill this role will have a big task on their hands and will need to take significant action in order to improve perceptions,” Price said.
The program also involves changing the operating model of its global commercial infrastructure, including creating a platform for the Americas region modeled after its operations in the EMEA and APAC regions. Along with the change, the company promoted Martino Scabbia Guerrini to chief commercial officer, a newly created role.
The plan similarly lays out a goal of implementing a cost reduction program, which the company expects will deliver $300 million in fixed cost savings by removing spending in what it calls “non-strategic areas of the business,” and right-sizing its structure. It also wants to reduce debt and deleverage the balance sheet.
