VF Corp. has decided to allocate an extraordinary budget of $40 million this year to support special new marketing activities. The bulk of it will be spent to boost the development of three brands – The North Face, Vans and 7 For All Mankind – that seem to have the highest growth potential.
In particular, TNF will invest for the first time in TV and online video advertising in a dozen markets. Like Vans, TNF will also make more use of social media. An additional $10 million will be spent on product innovation and sustainability programs.
In Europe, TNF will also make greater use of e-commerce. Online sales were successfully launched in the U.K. and Sweden last Dec. 13 via www.thenorthface.com/eu, pushing traffic on this revamped European website up by more than 160 percent as of the end of the year. E-commerce will be extended to France, Ireland and Denmark in the third quarter this year, and then to other countries later on.
Globally, the Outdoor & Action Sports Coalition, to which TNF, Vans and Reef belong, posted a 45 percent jump in operating profit to $147 million in the fourth quarter ended Dec. 31, or an operating margin of 20 percent. The division’s revenues grew by 8.2 percent to $730.9 million, with increases of 7 percent for TNF and 14 percent for Vans.
In constant currencies, divisional revenues rose by 4 percent in the Americas and by 9 percent elsewhere, sustained by exceptionally strong growth in Asia. China will be a focus of investment in retail fixtures and visual merchandising this year for TNF, Vans and VF’s Lee jeans. TNF will sponsor a 100-kilometer race in the capital of Beijing.
For all of 2009, the coalition’s revenues rose by only 0.4 percent to $2,752.0 million, while operating earnings climbed by 11.9 percent to $508.3 million.
Details on European operations have not yet been released. At the Ispo fair, before last Thursday’s corporate announcement, European officials indicated that TNF experienced strong double-digit increases in sales and better earnings in the EMEA last year, with growth all over the region.
More focused country-specific collections and more controlled retail space contributed to the growth. Specific styles have been developed for Germany and Southern Europe, and 41 percent of EMEA products are now designed in Europe, 10 percentage points more than a year ago.
Last year, TNF EMEA opened three corporate stores, one outlet, five partnership stores and 75 shop-in-shops, including seven at El Corte Inglés department stores. These openings took the total door count in EMEA up to 47 stores, of which seven are corporate, plus 200-odd shop-in-shops.
Nine new corporate stores, two partnership stores and 55 shop-in-shops are to be opened this year. On top of this, TNF has struck special partnerships with 152 top-level specialty multi-brand retailers across Europe. They get more frequent stock replenishment, merchandising and advertising support. They will also participate in a special contest next October for consumers to spend a weekend with one of the numerous athletes on the TNF team.
VF’s total revenues were virtually flat in the fourth quarter of 2009, rising by only 0.2 percent to $1.92 billion, of which 30 percent were generated outside the U.S. The group’s net income fell by 42.2 percent to $66.9 million because of numerous charges, including a writedown of $114.4 million on the goodwill and other intangibles as the results obtained by Reef, Lucy and Nautica have been worse than expected since their acquisition. The American Lucy chain of stores has been integrated into the Outdoor Coalition because of its focus on women’s active wear.
Excluding exceptional items, VF’s net profit increased by 28 percent in the quarter. For the full 2009 financial year, total revenues declined by 5.5 percent to $7,220 million and net profit fell by 24.0 percent to $458.5 million. The gross margin increased to 44.3 percent from 43.9 percent, but the operating profit went down by 21.5 percent to $736.8 million.
For this year, the management is predicting an increase of between 2 and 3 percent in group revenues, with the Outdoor and Action Sports Coalition likely to post a high-single-digit gain.
Earnings per share should increase by between 9 and 11 percent. Gross margins are seen growing by 4 full percentage points, with half of the improvement stemming from the group’s expanding retail operations, which now represent 19 percent of revenues, and the other half from high-margin lifestyle brands and a better supply chain.