Last year, VF Corporation (NYSE: VFC ) made a bold forecast. It said that by fiscal 2017, it would be pulling in $17 billion in annual revenue. When the company announced its fourth-quarter results earlier this year, things had gotten a little off track. VF revealed earnings that fell short of analysts' expectations, though, according to management, revenue growth put the company "roughly in line with [its] 2017 organic growth rate target."
The success of that plan lies heavily on the shoulders of a few brands, and none of them has more weight to carry than The North Face.
VF Corp.'s 2014 plan
Every journey begins with a single step, unless you're roller-skating to get there. For VF, 2014 is the first step and the biggest piece of that step -- let's call that bit "the stride" -- is the company's North Face brand. The North Face is part of VF's outdoor and action sports division, which accounts for around 55% of revenue.
The outdoor division also includes Timberland and Vans, along with a number of other major brands. In 2014, VF is hoping that the first half of the year will be driven by new growth all across the outdoor and action sports division. Marketing and expansion into China are going to be big drivers here, but the growth won't come without some competition.
In America, younger consumers are turning to exercise clothing as everyday clothing more and more. Gone are the days of purple spandex (please, please be gone). Now the fashion-forward are walking around in lululemon athletica (NASDAQ: LULU ) pants. It's not for me but I understand it. Would you spend $90 on a pair of pants that only the gym gets to see or would you wear them in public to show them off?
Lululemon and the growth of The North Face
The North Face and Luluemon have been banking on the increase in fitness spending that has swept across the sector. In the 12 months through August last year, spending on fitness apparel rose 7% while general apparel spending rose just 1%. That's a trend that some analysts have traced back to Juicy Couture, before everyone wised up and decided that velour track suits were kind of ridiculous.
With the shift in popularity, VF Corp. has been able to take advantage of its already-strong North Face position, but Lululemon has suffered setbacks over the past year, leaving it out of the best bits of market growth. VF's path to $17 billion relies on solid growth from The North Face, and it looks like it's growth that the company can provide.
The "exercise clothing worn on the street" trend seems likely to hold strong this year, which should keep the pedal pressed firmly down for The North Face. VF's plan for The North Face is to get the brand to $3.3 billion in revenue by the time 2017 rolls around. That's a lot of pressure to put on one brand, but I think VF Corp. is up to the challenge.
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