VF Corporation (NYSE: VFC), a global leader in branded lifestyle
apparel and footwear, today announced its strategy and key
initiatives to support continued superior returns to its
shareholders. During an investor meeting in New York City, the
Company established its revenue target of $17.3 billion by 2017,
representing a five-year compounded annual growth rate (CAGR) of 10
percent, with 8 percent organic growth and 2 percent growth
anticipated from acquisitions. VF also announced its earnings per
share target of $18.00 for 2017, representing a five-year CAGR of
13 percent.
“VF’s model – consisting of powerful brands supported by
powerful platforms – continues to deliver outstanding value to
shareholders, as evidenced by 20 percent average annual growth in
total shareholder return over the past five years,” said Eric C.
Wiseman, VF Chairman and Chief Executive Officer. “By leading in
innovation, connecting with consumers, expanding geographically and
growing our direct-to-consumer business, we look forward to
delivering the next chapter in a long and very successful growth
story.”
Summary of Key 2017 Financial Targets
In addition to new 2017 targets for revenues and earnings per
share of $17.3 billion and $18.00, respectively, the Company also
raised its projections for gross and operating margin. Given the
exceptional growth in its highly profitable Outdoor & Action
Sports, direct-to-consumer and international businesses, VF is now
targeting a gross margin of 49.5 percent in 2017, a 300 basis point
improvement over the 46.5 percent gross margin achieved in 2012.
Operating margin is expected to reach 16 percent, up 250 basis
points from the 2012 operating margin of 13.5 percent. Annual cash
flow from operations, by 2017, is targeted at $2.4 billion, with a
cumulative $9.5 billion in cash flow to be generated between 2013
and 2017.
Outdoor & Action Sports: Powerful Brands Driving Strong
Growth
VF’s Outdoor & Action Sports coalition is expected to
continue to be the key driver in the Company’s growth in the coming
years, with revenues expected to reach $11.1 billion by 2017. This
growth represents a five-year CAGR of 14 percent comprised of 11
percent organic growth and 3 percent growth coming from
acquisitions. Outdoor & Action Sports revenues are expected to
reach 64 percent of VF’s total revenues by 2017, up from 54 percent
in 2012. Strong growth is anticipated across all key regions: 12
percent in the Americas, 13 percent in EMEA and 24 percent in
Asia-Pacific.
Steve Rendle, Vice President, VF Corporation and Group
President, Outdoor & Action Sports Americas, presented global,
five-year growth targets for the coalition’s largest brands, The
North Face®, Vans® and Timberland®.
- The North Face® brand is anticipated to
grow at a 12 percent annual growth rate, with revenues reaching
$3.3 billion by 2017 from $1.9 billion in 2012.
- The Vans® brand raised its average
annual revenue growth projection, initially provided in June of
2012, from 13 percent to 15 percent. The brand is now targeting
total revenues of $2.9 billion by 2017, up from $1.5 billion in
2012.
- The Timberland® brand, now in its
second full year of VF ownership, continues to anticipate growing
revenues at an annual CAGR of 10 percent over the next five years,
increasing to $2.3 billion by 2017 from $1.5 billion in 2012.
Jeanswear & Imagewear: A Heritage of Authenticity and
Innovation
A focus on continuous product innovation is expected to drive
total Jeanswear revenues to $3.3 billion by 2017, with a CAGR of 4
percent over the five-year period. Globally, the Asia Pacific
region is expected to contribute the highest percentage growth,
with revenues expected to rise at a 12 percent annual rate over the
next five years. Scott Baxter, VF Vice President and Group
President, Jeanswear Americas, Imagewear and South America,
presented plans to grow the Lee® brand globally at a 5 percent
annual rate and the Wrangler® brand globally at a 3 percent annual
rate over the next five years. Baxter also reviewed updated growth
targets for Imagewear, where this highly profitable business,
including the Red Kap®, Bulwark® and Majestic® brands, is expected
to deliver a compounded annual growth rate of 4 percent, with
revenues reaching $1.3 billion by 2017.
Sportswear: Powering Nautica® Brand Equity
Based on its current momentum, Sportswear revenues are expected
to grow at a healthy CAGR of 8 percent over the next five years,
reaching $835 million in 2017, fueled by growth in both the
Nautica® and Kipling® (U.S.) businesses. Karen Murray, President,
VF Sportswear, discussed how the Nautica® brand’s increased focus
on performance-based products and strategies will help the Nautica®
brand reach $700 million in revenues by 2017, representing a 7
percent CAGR.
Contemporary Brands: The 7 For All Mankind® Brand’s
Strategy for Success
Revenues for the Contemporary Brands coalition, which includes
the 7 For All Mankind®, Splendid® and Ella Moss® brands, are
targeted to reach $645 million by 2017, representing an 8 percent
CAGR over the five-year period. The coalition’s largest brand, 7
For All Mankind®, is poised to deliver an average annual growth
rate of 8 percent through 2017 with revenues reaching approximately
$400 million. Susan Kellogg, President, VF Contemporary Brands,
reviewed key product innovations that are expected to drive
continued growth for the 7 For All Mankind® brand.
Direct-to-Consumer: Serving Consumers Directly
VF’s direct-to-consumer (DTC) business – consisting of its owned
retail stores and eCommerce businesses – will continue to be a
significant contributor to VF’s growth over the next five years.
Comprising 21 percent of total revenues in 2012, direct-to-consumer
is anticipated to grow to 25 percent of total revenues by 2017.
Mike Gannaway, Vice President, VF Direct/Customer Teams identified
key elements of the plan, including new store openings with a
strong international component, accelerated eCommerce growth and
continuous comp store increases to fuel a 14 percent CAGR in DTC,
to $4.4 billion in revenues by 2017. The Company expects to own and
operate approximately 1,775 stores, an increase of approximately
645 stores over the 1,129 stores at year-end 2012. As one of VF’s
fastest growing and most profitable businesses, eCommerce revenues
are expected to grow at an average rate of 25 percent annually over
the next five years. DTC growth is anticipated across all key
regions with CAGRs of 12 percent in the Americas, 21 percent in
EMEA and 15 percent in Asia-Pacific, respectively.
International Expansion: Fueling Growth Across Key
Geographies
International growth is another key pillar of VF’s growth, and
is expected to comprise 43 percent of total revenues by 2017
compared with 37 percent in 2012. Revenues are targeted to hit $7.4
billion in 2017, with a CAGR of 13 percent over the five-year
period. During a panel discussion, Karl Heinz Salzburger, Vice
President, VF Corporation and President, VF International together
with other executives from VF’s international team provided an
overview of brand strategies that are expected to fuel revenue
growth in each key geographic region, including compounded annual
growth rates of 17 percent growth in Asia-Pacific, 15 percent in
the Americas (non U.S.) and 11 percent in EMEA.
Driving Total Shareholder Return
In addition to providing the key factors behind the gross margin
improvement and operating margin expansion expected by 2017, Bob
Shearer, Executive Vice President and Chief Financial Officer,
affirmed the key priorities for VF’s strong cash flow. Those
priorities remain as acquisitions, dividends and share repurchases.
The Company continues to target a dividend payout rate of 40
percent, more than 15 percent annual total shareholder return and
is targeting 20 percent for the Company’s return on invested
capital.
“We are both proud of our past and excited about our future,”
Wiseman continued. “While the transformation VF has made over the
past decade has been incredible, we believe we’re just beginning to
achieve our true potential. The combination of the industry’s most
diverse brand portfolio, a proven strategy, a team that
consistently delivers and unsurpassed competitive advantages
uniquely position VF to deliver consistent, sustainable value for
both our consumers and shareholders – now and in the future.”
Additional Presenters
Additional presenters from VF’s senior management included:
Stephen Dull, Vice President, Strategy & Innovation; Tom
Glaser, Vice President and President, Supply Chain; Aidan O’Meara,
President, VF Asia Pacific; Martino Scabbia Guerrini, President,
Contemporary, Jeanswear & Sportswear Brands International and
Rick Wood, President, Outdoor & Action Sports EMEA.
Webcast Replay and Information
The meeting is being broadcast live today on the company’s
website at www.vfc.com from approximately 8:30 a.m. to 2:30 p.m.
(ET). For those unable to listen to the live broadcast, an archived
version will be available at the same location through midnight,
Sept. 13, 2013. Additionally, all presentations, videos and the
event’s transcript (once it’s available) will be accessible at
www.vf17X17.com following the event.
About VF
VF Corporation is a global leader in branded lifestyle apparel
and footwear with more than 30 brands. The company’s largest five
brands are The North Face®, Wrangler®, Timberland®, Vans® and Lee®.
Other brands include 7 For All Mankind®, Bulwark®, Eagle Creek®,
Eastpak®, Ella Moss®, JanSport®, Kipling®, lucy®, Majestic®,
Napapijri®, Nautica®, Red Kap®, Reef®, Riders®, Splendid® and
SmartWool®. For more information, please visit www.vfc.com.
Forward Looking Statements
Certain statements included in this release and the attachments
are "forward-looking statements" within the meaning of the federal
securities laws. Forward-looking statements are made based on our
expectations and beliefs concerning future events impacting VF and
therefore involve a number of risks and uncertainties. You can
identify these statements by the fact that they use words such as
“will,” “anticipate,” “estimate,” “expect,” “should,” and “may” and
other words and terms of similar meaning or use of future dates. We
caution that forward-looking statements are not guarantees and that
actual results could differ materially from those expressed or
implied in the forward-looking statements. Potential risks and
uncertainties that could cause the actual results of operations or
financial condition of VF to differ materially from those expressed
or implied by forward-looking statements in this release include,
but are not limited to, the level of consumer confidence and
overall level of consumer demand for apparel; fluctuations in the
price, availability and quality of raw materials and contracted
products; disruption to VF’s distribution system; disruption and
volatility in the global capital and credit markets; VF's reliance
on a small number of large customers; the financial strength of
VF's customers; VF’s response to changing fashion trends;
increasing pressure on margins; VF's ability to implement its
growth strategy; VF's ability to grow its international and
direct-to-consumer businesses; VF's ability to successfully
integrate and grow acquisitions, including the Timberland
acquisition; VF's ability to maintain the strength and security of
its information technology systems; adverse unseasonable weather
conditions; stability of VF's manufacturing facilities and foreign
suppliers; continued use by VF's suppliers of ethical business
practices; VF's ability to accurately forecast demand for products;
continuity of members of VF's management; VF's ability to protect
trademarks and other intellectual property rights; maintenance by
VF's licensees and distributors of the value of VF's brands;
foreign currency fluctuations; changes in tax liabilities, and
legal, regulatory, political and economic risks in international
markets. More information on potential factors that could affect
VF's financial results is included from time to time in VF's public
reports filed with the Securities and Exchange Commission,
including VF's Annual Report on Form 10-K and Quarterly Reports on
Form 10-Q.
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