North Face 2010 Annual Report Download - page 3

Those investments paid off handsomely. In 2010 revenues rose
7% to $7.7 billion and gross margins reached an all-time high
of 46.7%. Earnings per share were $6.46 (excluding a noncash
impairment charge for goodwill and intangible assets), up 25%
from 2009. During the year we generated $1 billion in cash
from operations —another record—and our financial position is
stronger than ever. We enter 2011 with great momentum, con-
fident in our brands’ ability to generate substantial growth, and
well-positioned to deliver another year of outstanding results
to our shareholders.
Key Growth Enablers:
International and
Direct-to-Consumer
Extending the reach of our brands internationally is one of our
core growth strategies, and in 2010 international revenues grew
8% in constant dollars. Asia is a tremendous growth market for
our brands, and 2010 revenues in Asia grew by 31%. We now
have four primary platforms established in Asia to support
growth: jeanswear, primarily with our Lee® brand; outdoor with
The North Face® brand; action sports with the Vans® brand;
and handbags and accessories with the Kipling® brand. Each of
these businesses is growing rapidly, giving us confidence in our
ability to achieve our target of $1.3 billion in revenues from Asia
within the next five years.
Another core growth strategy is expanding our direct-to-
consumer businesses, through our brands’ retail stores and
e-commerce. In 2010 our direct-to-consumer revenues grew
by 13%. At year-end we had 786 stores across our portfolio of
brands, and expect to open about 100 new stores in 2011.
Strong Brands Fueling
Strong Performance
With revenues rising 14% in 2010, our Outdoor & Action Sports
businesses continue to fuel both our top and bottom lines. Our
focus on expanding our Outdoor & Action Sports businesses,
The North Face® and Vans® brands in particular, has resulted in
exceptionally strong growth. In 2010 Outdoor & Action Sports
accounted for 42% of total revenues, up from only 22% five
years ago. By 2015, Outdoor & Action Sports should account
for at least half of VF’s revenues.
Jeanswear coalition revenues were up slightly in 2010, with
growth accelerating as the year progressed. The key brands in
our Jeanswear coalition —Wrangler® and Lee®—are as strong as
they have ever been. Our brands’ use of consumer research
and new processes to drive innovation has greatly strength-
ened our product pipeline and is resulting in market share gains
and positive momentum for both brands within their respec-
tive channels of distribution.
Revenues and margins of our Imagewear coalition, comprised
of our Image (or uniform) and Licensed Sports Group busi-
nesses, rebounded strongly in 2010. While they serve different
consumers, these businesses share outstanding service and
inventory replenishment capabilities, providing them with a
competitive advantage to expand their market shares.
To our Shareholders:
Early in 2010 we made the decision to intensify our
brand investments to drive revenues in our highest
growth, highest profit markets and opportunities.
The result was $100 million in additional brand
marketing over 2009 levels. Our investments
were designed to build stronger connections with
consumers, heighten brand awareness in key
markets, and grow market share. While over half
the increase in spending was behind The North Face®
and Vans® brands, where brand investments
doubled during the year, nearly every brand in our
portfolio received additional marketing support
in 2010. We also made significant investments to
support our rapidly growing and highly profitable
businesses in China.
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