COMMENT: China pivotal to VF's future fortunes
Describing 2009 as "a year unlike any other we've experienced," apparel maker VF Corp says it is now "energised" about the year ahead as it moves from fire-fighting and focuses instead on top and bottom line growth.
Among its main priorities are growing its outdoor and active sports brands such as The North Face and Vans, building its business in Europe, expanding its retail activities, and developing a global approach to sustainability.
And in common with many of its rivals, it also sees China as pivotal to its future fortunes, with chairman and chief executive officer Eric C Wiseman telling analysts on a conference call yesterday (11 February) that "super-charging growth in China," is among the firm's chief ambitions.
The apparel maker's apparent bullishness comes hot on the heels of better-than-expected fourth quarter and full-year results and a forecast for higher sales and earnings in 2010.
Indeed, although its fourth quarter results were overshadowed by a $114.4m write-down charge related to the Nautica, Reef and Lucy brands, stripping this out would have seen a rise in fourth quarter profit from $115.9m to $181.3m.
Perhaps one of the clearest signs that the business has passed that crucial tipping-point between recession and recovery is its reinvestment in advertising - often one of the first areas to be cut when times are tight.
Of the $50m set aside this year to accelerate growth at it strongest lines - including North Face, Vans and 7 For All Mankind - $40m will go on advertising, including social and digital media, new mobile applications and social networking.
The remaining $10m will be directed at product development and sustainability.
"High-growth, high-profit international markets such as Asia," are also earmarked for investment, Wiseman said, with the company planning to open another 400 outlets in China by the end of the year on top of the 1,000-store network it already has in the country.
And a look at Thursday's numbers shows why this is such an attractive opportunity.
VF's Asian business saw fourth-quarter revenues jump 40%. And for 2009 as a whole, Asia revenues rose 28% against a 1% decline in overall international sales on a constant currency basis. Revenue growth in Asia is also on track to exceed 20% in 2010, the company believes.
Its ambitions don't end here though. International revenues accounted for 30% of VF's total revenues in 2009 and 2008 - and are expected to soar to around 40% over the coming years.
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