Blog: VF plans leave little room for error
Leonie Barrie | 21 March 2011
US apparel giant VF Corporation last week unveiled aggressive five-year expansion plans, targeting revenue growth of US$5bn by 2015 and a $5 hike in earnings per share.
Central to the company's projections is its portfolio of outdoor and action sports brands, most notably The North Face and Vans, which are tasked with generating $3bn of that $5bn revenue growth. Other segments will have to pull their weight too: a combination of sportswear, imagewear and contemporary brands are scheduled to add an extra $1bn. And jeanswear, led by the Wrangler and Lee brands, is set to contribute a similar figure, helped by international sales in Asia, Europe and Latin America.
The strategy seems to cover all the bases. But it will also take an almost 100% hit rate to meet its goals.
Meanwhile sportswear leader Nike is fretting about the cost of doing business, after its third quarter earnings missed expectations and it warned that rising oil, cotton and transport costs are set to continue to affect its near-term profitability. The company is also vowing to hike its prices this year in a bid to offset input pressures.
Oregon-based Nike saw quarterly profit rise 5% to $523m on the back of a 7% increase in sales. And futures orders, an important measure of upcoming demand, are up 9%. But gross margins fell 110 basis points to 45.8%.
Meanwhile, German sporting goods firm Puma has promoted head of strategy, Franz Koch, as its new CEO, replacing Jochen Zeitz who has been in charge for the past 18 years. Zeitz is to head the sports lifestyle division of Puma's owner, French retail group PPR.
And over in India, garment manufacturers have staged a two-day strike to protest against a proposed 10% excise duty on branded India-made ready-to-wear garments. Firms fear the new tax will make this highly labour intensive industry uncompetitive against imports, and hope to prevent the plans, which were outlined in last month's budget, from being passed by the Indian parliament.
Though exporters are exempt, they too are anxious and claim the close links between domestic sales and export garment production would increase administrative costs and bureaucracy for exporters.
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