VF Looks to Cast Off Lee, Wrangler Brands -- WSJ
August 11 2018 - 3:02AM
Dow Jones News
Its jeans division's sales have been declining
By Dana Mattioli and Suzanne Kapner
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 11, 2018).
VF Corp., owner of Lee and Wrangler jeans, is exploring
strategic options for its denim business that could include a sale
or spin off of the classic American brands, according to people
familiar with the situation.
The apparel conglomerate has owned Wrangler and Lee for decades
and they were once its core, but the company's jeans sales have
slowed in recent years as more women opt for yoga pants or premium
denim brands like J Brand or Frame.
VF, which has a market valuation of $38 billion, has been paring
back its wide-ranging portfolio to focus on its fastest-growing
brands, such as Vans sneakers, The North Face jackets, and
Timberland boots.
VF's denim business last year had $2.66 billion in sales and
$422 million in profit. A typical multiple in the apparel industry
could value the business at several billion dollars. It isn't clear
what other brands might be part of the company's review.
The overall U.S. jeans category had total sales of $16.2 billion
in 2017, down from $18.8 billion in 2013, according to Euromonitor
International. One big brand bucking the downward trend is Levi
Strauss & Co., whose revenue increased 8% in its most recent
fiscal year.
VF's jeans division, which also includes the Rustler and Rock
& Republic brands, hasn't fared as well. Sales have fallen
nearly 5% since 2015, while profit in the division is down 2% over
that period.
VF sells its jeans through mass merchants like Walmart Inc. and
department stores, many of which have curtailed orders in recent
months as they sell off excess supply. On its most recent earnings
call in July, VF forecast growth this year for most divisions
except jeans, where revenue is expected to be unchanged from last
year.
VF Chief Executive Steven Rendle did allude to a possible
recovery for the denim business, particularly Wrangler, which he
said had shown improved results for four consecutive quarters. "Is
there a jeans cycle going on out there?" Mr. Rendle said in July.
"Maybe."
Unlike today, when jeans are often a fashion statement, the Lee
and Wrangler brands were originally designed for laborers and
cowboys. The Lee brand was introduced in 1912 by Henry David Lee, a
wholesale grocery distributor who was unhappy with the inconsistent
delivery of workwear from suppliers.
Wrangler made its debut in 1947 as western wear, with stiff,
blue jeans designed by celebrity tailor Rodeo Ben. Its early
endorsers included professional rodeo riders, and it continues to
sponsor rodeos, bull riders and former Nascar driver Dale Earnhardt
Jr.
By the 1980s, after VF had acquired Lee and Wrangler, it had 25%
of the jeans market, according to the company's website. The denim
business was VF's core -- delivering more than half of its revenue
in 2002 -- until the company began to diversify by scooping up
other brands.
The Greensboro, N.C., company acquired North Face in 2000,
sneaker brand Vans in 2004 and Timberland in 2011. It currently
owns nearly two dozen labels, including backpack maker JanSport,
surf brand Reef, and workwear brand Dickies, which it acquired a
year ago for $820 million.
The company has been shedding some brands. In March, it sold the
apparel brand Nautica and last year it divested its Majestic brand,
the official supplier of Major League Baseball uniforms, to
Fanatics, an e-commerce startup.
In 2016, VF sold its once-hot denim brand Seven For All Mankind,
which helped spark a premium denim boom with jeans that ran to $200
or more and were worn by celebrities including Sarah Jessica Parker
and Heidi Klum. Seven struggled after a plethora of newer and
edgier labels flooded the market.
Investors have cheered the moves. VF's shares have surged more
than 53% in the past year. On Thursday, the shares closed at an
all-time high of $95.55.
Write to Dana Mattioli at dana.mattioli@wsj.com and Suzanne
Kapner at Suzanne.Kapner@wsj.com
(END) Dow Jones Newswires
August 11, 2018 02:47 ET (06:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
VF (NYSE:VFC)
Historical Stock Chart
From Jun 2024 to Jul 2024
VF (NYSE:VFC)
Historical Stock Chart
From Jul 2023 to Jul 2024