The US clothing group VF Corporation is lowering its forecast for the current financial year and presenting its strategy for the next five years.
For fiscal 2023, VF, which includes brands like The North Face and Vans, now expects revenue growth of 5 to 6 percent. When the results for the first quarter were presented at the end of July, the group still assumed growth of at least 7 percent. Earnings per share should also be lower at 2.60 to 2.70 US dollars (2.68 to 2.79 euros), compared to 3.05 to 3.15 US dollars most recently.
five year plan
By 2027, the VF Group aims to achieve annual sales growth in the mid to high single-digit percentage range. Since 2020 and the outbreak of the pandemic, revenues have increased by an average of 5 percent, before that the growth rate was 15 percent in the three fiscal years to 2019.
Operating margin is expected to increase to around 15 percent by fiscal 2027.
“We are confident that we can deliver consistent, sustainable growth for our portfolio of brands over the long term,” said Managing Director Steve Rendle in a statement at Investor Day, where the five-year plan will be unveiled in detail.
All of the Group’s brands are expected to contribute to growth over the next five years. VF is pinning its hopes primarily on the outdoor brand The North Face and the streetwear label Supreme, whose revenues are expected to increase in the high single-digit to low double-digit percentage range.
The sales of the skate brand Vans and the fashion label Timberland are expected to grow in the mid-single-digit percentage range. VF expects Dickies revenues to grow in the higher single digits.
After acquiring streetwear brand Supreme for more than $2.1 billion (EUR 2.2 billion), VF currently sees a $600 billion target market in activewear, outdoor, workwear and streetwear. “Our branded business isn’t where it could be,” Rendle said during a webcast on Wednesday. The group intends to continue investing in the brands and relationships with existing customers.
More online sales and local production
The online business now accounts for 20 percent of total sales, of which the wholesale business contributes 54 percent and the rest comes from its own stores. The digital business should grow annually in the low double-digit percentage range until 2027, said digital boss Velia Carboni during the webcast.
She also gave an insight into how the group now not only collects data from its customers, but also uses data from third parties to measure how the group’s brands compare to the competition. The data also allows VF to observe and react to customer behavior in real time.
In the past financial year, the VF Group produced more than 410 million products in more than 87,000 colors and styles. Production has been further diversified over the past three years; Manufacturing volumes in Indonesia and Bangladesh have increased and these countries are among the top five sourcing countries along with China, Vietnam and Cambodia. Production is also becoming increasingly local: In the current fiscal year, 29 percent of the goods sold in North America are to be manufactured in the region, in the Europe, Middle East and Africa (EMEA) region it will be 24 percent.
VF wants to continue growing in Europe
Sales in the EMEA region are expected to grow annually in the high single-digit to low double-digit percentage range. And thus continuing the development of the past few years, in which revenues increased from 2.2 billion US dollars in 2017 to 3.4 billion US dollars in the past financial year.
In the same period, sales in the Asia-Pacific region increased from US$1 billion to US$1.6 billion. Here, too, growth in the high single-digit to low double-digit percentage range is targeted. This should happen with local adjustments in design and by introducing brands into new markets, such as Supreme in China.
This post was updated at 6:18 p.m. on September 28 with details from the Investor Day webcast.