Yahoo Finance Wrangler Owner VF Corp. Shifts Focus to Millennials with Spin-Off
It was just 1996 when a pair of Wrangler jeans was owned by one out of every four males in the United States. Those days are long gone now, as trends now favor more lifestyle-focused “athleisure” clothing.
In response to this ongoing transition in the clothing industry, apparel conglomerate VF Corp. VFC announced today that it is planning on spinning off its denim division, the Wrangler and Lee labels, into its own public company.
The move allows the company to narrow its focus on its more successful active-lifestyle brands, including Vans, The North Face, Timberland, Jansport, and more. These brands are more tailored towards young consumers in today’s retail landscape.
The new jeans company, which hasn’t been named yet, will have to deal with stagnation in the decaying denim business. In VF’s Q1, organic revenues (excluding acquisitions) for jeans grew only 3% year over year. Further, the company projected nearly flat revenues for the rest of fiscal 2018.
In addition to falling out of style, the Wrangler and Lee brands have been hurt by their major customer, Walmart WMT, moving more towards its own private-label brands.
On the other hand, the future looks bright for the now-smaller VF portfolio of brands. The company will be able to make young consumers the center of its attention by focusing on contemporary styles in apparel. Other companies, such as Lululemon LULU and Canada Goose GOOS, have seen tremendous results from producing Millennial-loved clothing.
Vans and North Face will be the core brands for VF moving forward. Both are tailored towards younger consumers and have strong growth potential. The popularity of these brands is already evident, as revenues for Vans surged 35% in the first-quarter 2018, and the brand is expected to record revenue growth of at least 15% in fiscal 2018. North Face saw 8% growth in Q1.
In regards to the rise of the Vans brand, VF CEO Steve Rendle remarked in an interview, “The key element to its growth is having a brand to let young people be who they want to be.”
In the company’s recent earnings call, Rendle stated that VF will provide more insight on Vans’ next chapter of growth at the brand’s investor day in September. Meanwhile, VF has set goals to make North Face the leader of the outdoor lifestyle market, a currently trendy space.
The denim spin-off is part of a larger 2021 growth strategy, which is aimed at redesigning the company’s portfolio and enriching its direct-to-consumer and digital businesses.
The initiatives seem to be working so far, with shares of VF rising over 24% this year to date. However, the stock fell -3.78% through late-afternoon hours on reports of the news. The drop may be attributed to market apprehension regarding the spin-off, but the long-term future looks promising for VF.
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