Vans Nearly Doubles Revenues In First Three Months Of 2018
Vans just went from most valuable brand in the VF Corporation portfolio to one of the hottest tickets in any industry. At Friday’s presentation, the US-based brand conglomerate – home of VANS, outdoor brand The North Face and work wear mainstays Dickies – reported stellar results for the first three months of 2018.
(Instead of Q1, the period is labelled as a ‘transition period’, because VFC will from now on end financial years on the last Saturday in March, instead of the one closest to December 31).
But back to Vans: The iconic skateboard footwear brand nearly doubled revenues in the first three months of the year, reporting a 45% revenue increase in the period ended March 31, 2018. The Outdoor & Action Sports coalition (VANS, The North Face) increased revenue by 27% to $2.01 billion during the period and generated $292 million in profits.
With Vans posting another record quarter as the top performer, the VF Corporation reported that revenue from continuing operations increased 22% (up 17% currency neutral) to $3.0 billion. These results include a $233 million revenue contribution from 2017’s Williamson-Dickie (home of Dickies) acquisition.
“Our core growth engines are driving strong global momentum as we begin to enter the acceleration phase of our 2021 strategy,” said Steve Rendle, Chairman and Chief Executive Officer, adding: “VF is in the midst of a transformation to become a purpose-led, consumer-centric organization. We are evolving and adapting to a rapidly changing marketplace and remain committed to delivering top quartile returns for our shareholders.”
VANS keeps winning
The new results continue a winning run for Vans, after already achieving an impressive 38% revenue increase in Q4 2017. Viewed by market region, Vans achieved 45% revenue growth in the Americas, 53% in EMEA and 32% in APAC.
Looking ahead, the company is optimistic: “Vans long track record of consistent performance gives us high confidence the brand will deliver 12% to 13% growth in fiscal 2019, including 20% growth in the first half,” said CEO Steve Rendle in the earnings call.
Asked about officially selling Vans product on Amazon, Scott A. Roe, Vice President & Chief Financial Officer, VF Corp. said: “We’ve really increased our attention and interaction with the Amazon team, not just as an individual brand, but we’ve brought a key account team together focused on really learning Amazon and learning how to really utilize that platform as part of our integrated marketplace choice.”
Last year, VFC already spent considerable efforts to “collaboratively to clean up the marketplace” for the North Face brand and Roe said that the “relationship is improving.” Meanwhile, CEO Steve Rendle emphasized that “at this point, our Vans business has not decided to move on to that platform” but also said that all VF brands are already sold on the Amazon-owned Zappos ecommerce site.
Success in a digitally disrupted market
So how does Vans keep delivering growth in the 30s and 40s in terms of percentile, in an age of digital disruption? There are several factors at work, most of all a strategic shift to becoming a customer-focused, omnichannel brand with a strong direct-to-consumer sales model and continued digital channel growth in the mid-double digits.
But that’s market talk. Vans first of all creates products that ooze classic California style that evolves over time without losing its roots. The brand also maintains close ties to core skateboarding by organizing global event series like the Vans Pool Series and opening House of Vans venues across the globe as free places to skate and connect to the brand. The ongoing ‘This is Off the Wall campaign’ hosts skate clinics for girls across the world. Vans also sponsors an active team comprising the day’s hottest rippers and respected skateboard icons such as Tony Alva, Steve Caballero, and Christian Hosoi.
In the bigger picture, Vans is not limited to just skate culture, but a mind set: Off the Wall goes beyond board sports – and embraces art, skateboarding, music. This positioning is what lends Vans a universal and long-lasting appeal into the future: “For fiscal 2019, the diversity of Vans growth and the team’s not-just-one-thing mentality, will continue to sustain our strong momentum,” said Rendle during the earnings call.
The brand also encourages loyalty among its followers: “During the quarter, Vans launched the Vans Family Loyalty program in the U.S., which allows members to access exclusive designs, experiences and earn and redeem points from purchases. In the first six weeks, more than 1 million brand fans joined, surpassing our expectations,” said CEO Steve Rendle. “The digital platform and how we interact there is very, very important. I do think there’s probably a cost-per-click increase.”
Outlook
In other news, VFC announced it had reached an agreement to sell its Nautica brand business to Authentic Brands Group (ABG) – in order to focus more resources on proven performers.
VF CEO Steve Rendle said that the company is, “intensely focused on protecting and enabling the explosive growth in Vans, shepherding the positive momentum of The North Face, while focusing on re-energizing growth in Timberland North America.”
On that note, the Outdoor & Action Sports coalition with its three-month revenues of over $2 billion now generates almost double the sales of VF’s two other coalitions; namely Jeanswear ($639 million) and Imagewear ($371 million).
For the VF Corp’s entire operation, full year fiscal 2019 revenue is expected to be in the range of $13.45 billion to $13.55 billion, reflecting year-on-year growth of approximately 9% to 10%. Earnings per share are expected to be in the range of $3.48 to $3.53. Revenue for Outdoor & Action Sports is expected to increase 8% to 10%.
These are lofty goals in today’s disrupted world market, but the shoe brand with the Waffle sole is bound to play a major part in getting there.
Quotes taken from VF’s official press release with supplemental quotes from earnings call broadcast on VF’s investor website.