North Face 2005 Annual Report Download - page 10

Authentic, iconic jeans
brands, like our Lee®
and Wrangler ®brands,
resonate with consumers
across Europe and Asia.
Germany is our biggest
market, accounting for
25% of our total
International Jeanswear
coalition revenues.
Weopened several new
stores last year, including
this Wrangler ®brand store
in Manchester, England.
How did the business
perform in 2005?
What are the key
industry trends?
What areyour
biggest markets?
Which regions show
the greatest growth?
What are the main challenges
you currently face?
What are you doing to
further grow Lee®and
Wrangler®brand sales?
What areyour plans for
owned retail storeexpansion?
Looking ahead, what’s your
most exciting opportunity?
VF Corporation 2005 Annual Report
16 17
Sales rose slightly in 2005, owing to favorable currency exchange
rates. Our flagship Lee®and Wrangler ®brands maintained stable sales
during the year, despite weak economic conditions across most of
Western Europe. Our mass market business continued to grow under
the Hero by Wrangler ®brand, but our H.I.S®brand faced challenges
due to soft market conditions in Germany, its primary market. We also
achieved strong growth in emerging markets such as Eastern Europe,
Russia and Asia.
The branded denim landscape remains highly fragmented with many
niche players emerging and disappearing in turn. But authentic, iconic
jeans brands—like Lee®and Wrangler ®—are still very important across
Europe and Asia. Product innovation drives the market, and styles and
finishes areconstantly changing. Many traditional retailers—such as
department stores, catalogues and independent shops—are strug-
gling in all major markets, while specialty players and some value-
based retailers aredoing better.
Germany is our biggest market, accounting for 25% of our total
International Jeanswear coalition sales. However,the U.K., Italy,
Scandinavia and France arealso important areas for us.
Wesee the strongest growth in emerging markets, including Eastern
Europe and Russia, where sales are growing at double-digit rates.
China is also a growth market for our Lee®and Wrangler ®brands.
Weak economic conditions confront us across Europe. Plus, as we’ve
seen in the U.S. over the past several years, many of our customers
continue to expand their private label programs. Fortunately, we have
two of the strongest, most recognizable brands in the world—Lee®and
Wrangler ® —which consumers know and trust. We’ve taken aggressive
action to improve our replenishment and in-season business with our
key customers, leveraging our considerable inventory and brand man-
agement skills and drawing on new products and programs across all
our brands.
We plan to build momentum from the success of our most recent
product innovations, such as the Lee X-Line™and Wrangler W Rivet ™
programs. We are pleased with the initial strong response to our new
Lee®brand marketing campaign, which soon kicks off in full. We are
also releasing striking new visuals to extend the successful Wrangler ®
brand “WANTED” campaign. To bring more products to market more
quickly and regularly, we have substantially strengthened our product
development teams and processes. We’ve also reorganized our man-
agement team to provide stronger support to our emerging market
businesses and our European licensing activities, both of which we
expect to double within the next five years.
We’ll continue to add new stores in 2006 and beyond for our flagship
brands to showcase our full range of products in a brand-focused
environment. Following the successful opening of our first Lee®brand
store in London in 2004, we added a Wrangler®brand storein
Manchester,England and a Lee®brand storein Milan, Italy.In 2006 we
plan to open three Wrangler®brand and two Lee®brand stores in
major cities such as Amsterdam and Paris, while also expanding our
in-store programs with key retail partners, particularly in Eastern
Europe.
Without a doubt, China represents an outstanding prospect, due to the
sheer size of the population and a growing middle-class consumer
base that has an appetite for well-established, authentic brands. We’ve
been in the Chinese market since we launched the Lee®brand there in
1993, and last year launched the Wrangler ®brand there as well. Our
established infrastructure and base of experience in China can be
leveraged to support continued strong sales growth.
Jeanswear
International