VF Corp. Expects to Grow Market Share for Workwear

The workwear business, currently $800M in annual volume and profitable, is expected to "accelerate in Q2 and beyond."

VF Corp. is banking on its profitable workwear group to help it grow, as well as offset what has been an essentially flat North American wholesale business.

Chief executive officer Steven Rendle said in a telephone interview after the firm posted first-quarter results, “We have particular strength in the U.S. market with our Red Kap and Bulwark brands. Workwear is a large global market that’s about $30 billion [in size] and we have a 5 percent share. We’ve seen an uptick in growth here domestically, in the industrial, construction and health-care sectors. And there’s growth in the oil rig count that’s [now] up 100 percent year-over-year.”

Rendle said VF is foreseeing multiyear growth for the business for the entire global landscape due to projects connected to infrastructure improvements.

At VF’s Investor Day meeting in March, when the group disclosed its 2021 strategic growth plan, the ceo said the company was taking its existing Red Kap and Bulwark teams and combining them with its Timberland PRO and Wrangler Rigg businesses to create a new group focused on servicing the work sector from head to toe. It has two delivery models in place. Direct partnerships — B2B — with customers including the U.S. federal government and companies such as FedEx. The other model is its B2C distribution channel. The ceo said the company expects the new workwear group to see its business accelerate in the “second quarter and beyond.”

While not a sexy, designer fashion business, the workwear group is at least profitable and cash-efficient, posting about $800 million in annual volume, or 5 percent of the global workwear market.

Curt Holtz, president of VF’s imagewear, jeans and sportswear brands, said during the investor day presentation about the new workwear group: “When we generate revenue in the space, we tend to generate even higher profit growth, because it is such an efficient model. And finally as I said, we believe we’re on the beginnings of a recovery period here. We’re not dependent on that, but it certainly would be a nice tailwind.”

As for its core consumer brands, Rendle said its largest labels – Vans, The North Face and Timberland – along with international and direct-to-consumer platforms performed well and delivered solid results against a retail backdrop that is experiencing significant dislocation.

“Clearly a lot is going on in the U.S. marketplace….The consumer is still there interacting with authentic brands. That remains true. What we as brand owners need to do, either in our retail and digital environments and in key wholesale partnerships, is bring to market the highest-quality product in our own retail stores, with strong storytelling and strong merchandising,” Rendle said.

Scott Roe, VF’s chief financial officer, added that the group — when looking at the consumer’s path to purchase — is meeting them wherever they are making their purchase. “While it’s useful to talk about e-commerce and wholesale because they are different channels to distribution, we are growing our business holistically. Ninety percent of commerce is still done in stores. E-commerce is growing rapidly, and we do a lot of business in our stores, but we’re looking at each of our delivery vehicles are reinforcing the others” Roe said.

Company executives said during the investor day presentations that its own retail doors will be a key strategy going forward, and expected to comprise 35 percent of VF’s total sales from the current 28 percent. Growth will also come from a focus on mergers and acquisitions.

Separately, the company’s Wrangler business is expanding its offerings in its men’s collection for the outdoor market. The line includes special performance fabrications for shirts, bottoms and jackets, as well as UPF 30 protection and moisture wicking.

For the three months ended April 1, net income fell 19.6 percent to $209.2 million, or 50 cents a diluted share, on a net sales decline of 2 percent to $2.56 billion.

The company updated its fiscal 2017 outlook to reflect its sale of its Licensed Sports Group, expected to close in the second quarter. It forecasted EPS to be down at the low single-digit percentage rate, compared to 2016 adjusted EPS of $2.98.

Shares of VF on Friday fell 5.6 percent to close at $54.63 in Big Board trading.

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