VF Corp. is on a quest to become a consumer-minded, retail-centric company. That means some of its workwear brands have to go.
VF is considering selling nine brands: Red Kap, VF Solutions, Bulwark, Workrite, Walls, Terra, Kodiak, Work Authority and Horace Smalls. All have registered trademarks, with total volume at $865 million, or about half the company’s total work segment sales in 2019. Total volume is primarily from U.S. accounts in the B2B channel. VF has a projected revenue growth in the low- to mid-single digits for the group, with a gross margin rate of less than 35 percent.
Dickies and Timberland Pro, seen as VF’s marquee workwear brands, are not included in VF’s review process and would remain in the company’s work portfolio.
VF acquired the Dickies brand in 2017 when it bought Williamson-Dickie Mfg. Co. for $820 million. VF projected revenue growth in the mid- to high-single digits, with a gross margin rate of more than 40 percent. The business is primarily B2C, with most of the revenue generating from the U.S., although about 30 percent stems from overseas sales.
Exiting the occupational work segment would improve VF’s business model alignment with its growing international and DTC platforms, which in turn would reduce overall operational complexity and simplify its supply chain footprint, the company said.
“Driving and optimizing our portfolio continues to be a top strategic priority for VF, and exploring strategic alternatives for our occupational work brands is the natural next step in that process,” Steve Rendle, chairman, president and CEO, said.
VF’s consumer-oriented goal was first disclosed in March 2017 at an Investor Day presentation. The company said VF’s three key brands–Vans, The North Face and Timberland–would fuel growth and drive shareholder return, adding that an expansion of its international operations and direct-to-consumer platform would also buoy the business. VF’s aim was to have retail represent 35 percent of the company’s total sales by the end of 2021, up from a 28 percent contribution in 2017.
Not long after the Investor Day meeting, Rendle projected that the workwear category was about a $30 billion global market, in which VF had a 5 percent share. VF grew two platforms for workwear, one through direct partnerships with U.S. federal government agencies and companies such as FedEx in its B2B model; the other is its B2C distribution channel.
VF, which reached certain metric targets set out at its 2017 meeting ahead of schedule, held another Investor Day last September in Boulder, Colo.–its new headquarters–where it disclosed an updated five-year strategy running through 2024. The new five-year projection plan has VF planning on returning $10 billion to shareholders through dividends and share repurchases, along with revenue growth at a clip of 7 percent to 8 percent on a compounded annual growth rate.
“Divesting these brands would leave VF with a simplified portfolio of higher-growth, consumer-focused brands, while providing financial flexibility to fuel further strategic initiatives and enhance shareholder value,” Rendle said.
The nine brands up for sale represent an occupational component of VF’s work segment that outfits workers in the industrial, service and government sectors. The business has a “strong and consistent financial profile and valuable customer relationships. Our teams have done an excellent job building this business over many years, putting us in an ideal position to find the best future owner for these brands,” Rendle said.