Apparel powerhouse VF Corp believes it is well-positioned to emerge as a winner from the coronavirus crisis – with an increased consumer focus on the outdoors, health and wellbeing set to boost its activity-based lifestyle brands.
The parent of businesses including Vans, The North Face, Timberland and Dickies, is “preparing for this new future and positioning our brands to set the standard for what’s next,” according to CEO Steve Rendle.
“None of us knows exactly how the Covid-19 outbreak will change our world, but we’re already beginning to see signs of what’s to come,” he said on a call with analysts last week.
The company has identified a potential post-pandemic shift in consumer behaviours and value systems that its brands and businesses “are uniquely positioned to address.”
- “We believe people will place greater value on exploring outdoors after spending so much time in their homes.
- “We believe there will be an increased commitment to personal well-being and active lifestyles, with health becoming a major new priority.
- “We believe people will have a greater appreciation for the frontline workers who keep others safe, and the tradespeople who keep our world running.
- “We believe there’ll be an elevated focus on environmental sustainability that will lead to a sharper focus on combatting global climate change;
- “We believe the proliferation of e-commerce will be significant, with online shopping serving as a lifeline for so many consumers around the world during the pandemic.”
These changes, whether subtle or seismic, “could not be more in line with our portfolio, the reshaping we’ve been doing the last three years, but also our deep commitment to being purpose-led performance driven as our way of creating value for our shareholders.”
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And they’re already “coming out loud and clear in China,” Rendle said, “with people very focused on their individual health, the health of the climate.”
He added: “If people are less apt to be thinking about travel outside of their home city or home state, this connection with the outdoors and getting back into outdoor activity nearby the house is probably one of the most significant trends coupled with health and wellbeing.”
Ongoing actions to transform its business model to make VF more consumer-minded, retail-centric and hyper-digital are also taking on new importance “as digital activity and engagement continues to rise in a post-Covid world.
“We just focused on leveraging enterprise data and analytics with an emphasis on critical end-to-end data and digital capabilities to drive consumer engagement and loyalty. We’re also working to become increasingly agile in how our teams work together, enabling us to move faster to seize opportunities whenever and wherever they exist.”
Fulfilling commitments
The apparel and footwear maker yesterday (19 May) noted its Covid-19 relief efforts have so far raised more than $10.3m through corporate, VF Foundation and brand donations. On top of this, its Dickies workwear brand has produced as many as 3.4m gowns for US medical workers, while Vans is using shoe canvas to make 250,000 face masks.
It also provided an update on how it is working with its international suppliers, explaining: “VF is paying suppliers for all orders that have already been produced, as well as honouring all valid purchase orders with a factory release date before 1 June 2020.
“When a shipment must be delayed, VF engages with its suppliers to determine if the delay will create a cashflow challenge for the supplier. If so, VF will work with the supplier to support their financial needs through a variety of potential solutions.”
Speaking on last week’s call, chief financial officer Scott Roe admitted: “Many of these conversations are difficult, [yet] we have not strayed from our core values, approaching each discussion with honesty, transparency and integrity.”
Both Rendle and Roe believe the future is bright for purpose-led brands and companies “because their decisions will be principled, and based on values that consumers share.”
“There is no question that the Covid-19 disruption will have lasting impacts on our sector,” Roe said.
“There will be retail casualties; this will accelerate industry consolidation. We are witnessing the acceleration of digital commerce and the critical importance of direct consumer engagement. “We also believe this environment will shine an even brighter light on corporate values and highlight the importance of purpose-led enterprises.
“Ultimately, we believe what we’re witnessing right now is an acceleration of underlying trends which were forming before the crisis hit.”
Sales slump
The comments came as VF Corp reported a slight increase in full-year sales but warned its first quarter revenue was likely to halve due to a plunge in consumer demand and country-wide Covid-19 lockdowns.
For the year to 28 March full-year revenue rose 2% to US$10.5bn, but net income tumbled 46% to $679.5m. For the final quarter, revenue dropped 11% to $2.1bn, pushing the apparel giant to a loss of US$483.8m.
“Through the first ten months of fiscal 2020 our business delivered results above our stated long-term growth objectives. Then the world changed for all of us as a result of Covid-19,” Rendle said.
All of VF’s retail stores in the APAC region, including mainland China, have re-opened, but retail store traffic “remains down significantly” compared with last year. The company has started a phased reopening of its retail stores in the EMEA region, and is planning the same in North America – with most due to be open by mid-2020.
The company has also completed a $3bn bond offering, giving it around $3bn cash on hand as well as around $2.2bn available through its revolving credit facility.
“These prudent actions, most of which have been precautionary, have helped us preserve liquidity and given us more flexibility to manage our global business operations through the prolonged crisis,” Rendle said.
