North Face 2007 Annual Report Download - page 27

You announced a new five-year growth plan in early
January. What kind of company will VF be in 2012?
EW: Bigger and more profitable. We’re targeting $11
billion in revenues by 2012—that’s $4 billion in growth
over the next five years. And we’re targeting a 15%
operating margin, a full point higher than our previous
target. By 2012, we expect that 60% of VF’s revenues
will be generated by our lifestyle coalitions—Outdoor,
Contemporary Brands and Sportswear—compared to 44%
at the end of 2007. The remaining 40% will come from our
heritage businesses, Jeanswear and Imagewear.
MM: International revenues will also account for an
increasingly bigger piece of the pie. We see a third of
revenues coming from international markets by 2012,
up from 28% in 2007. Our direct-to-consumer business,
composed of owned retail stores and e-commerce, will also
be much bigger, growing from approximately $1 billion in
revenues today to $2.4 billion by 2012.
Which is more important to your plan: Organic growth
or acquisitions?
EW: We’re planning 8 to 10% annual growth in revenues
over the next five years—6 to 7% from organic growth and
2 to 3% from acquisitions. The fact that we expect more
growth organically than from acquisitions underscores the
confidence we have in our current portfolio of brands.
Why is retail growth such an important part of your plan?
EW: Managing our own retail stores allows us to showcase
the lifestyle, power and full range of products of our
strongest brands. We’re able to surround consumers with a
complete brand experience—from the design and layout of
the store to the assortment of products they contain. We’re
fortunate that we’ve acquired brands with retail talent and
expertise, and we’re using that expertise to aggressively
grow our base of owned stores. At the end of 2007, we had
more than 630 stores around the world, and that number
could double over the next five years. We take a disciplined
approach to opening new stores to ensure they contribute
positively to both the top and bottom lines.
What makes you so confident that VF can achieve its
five-year goals?
EW: A number of reasons, really. First, we have truly
great people who are passionate about their businesses
and perpetually driven to succeed. Our corporate culture
is both inclusive and collaborative because we respect
and value diverse opinions. Second, we have the strongest
portfolio of brands in the industry, so we have many
opportunities for future growth. Third, we have established
operations in many different parts of the world, which can
be leveraged as our brands achieve scale and as we add
new brands. Finally, we’ve proven that we’re really good
at making smart acquisitions—and making them work.
I’m confident that we can build on that track record.
Mackey, what are the most important lessons from
VF’s past that can help Eric and his team build on that
success in the future?
MM: VF has been successful because we’ve learned how to
focus the assets of a very large corporation on the needs of
individual consumers. That’s the key, in my opinion—it’s
what we’re all about. To keep that up, you need to continue
building a team of leaders who are really dedicated to our
brands and to the needs of consumers and retailers. You
need to empower them to make their own decisions—and
support those decisions with tools and resources that only
a company like VF can provide. That goes way beyond
mere logistics. It’s all about building on the “culture of
collaboration” that makes VF unique. That’s how we’ve
achieved our success. And I think that’s how VF will
continue to grow.
Eric, what do think about that advice?
EW: That’s an easy one. I’ll take it.
What are VF’s greatest opportunities for growth in 2008?
MM: Our international and direct-to-consumer businesses
should continue to drive growth in 2008. In terms of our
coalitions, Outdoor and Contemporary Brands will be
particularly strong contributors to growth this year.
EW: Absolutely. In Outdoor, we’re expecting growth across
our brands. The North Face® brand is making great strides in
many product categories and will launch an array of new
products in early 2008. Our Vans® brand should achieve
double-digit growth in its apparel business, and both the
Kipling® and Napapijri® brands are benefiting from expanded
product lines along with growth in Europe and other
international markets. In addition, our 7 For All Mankind®
and lucy® brands should both continue their momentum.
Jeanswear’s international business continues to look strong,
and we expect Majestic Athletic to lead the growth of our
Imagewear coalition.
What are the key trends—both positive and negative—
impacting your business today?
EW: Consumers continue to seek distinctive brands that
enhance their lives and make a statement about who they
are—or who they aspire to be. That’s what VF is all about.
Our brands are rich in history, heritage and authenticity.
They speak the language of their consumers’ lifestyles,
giving us a big edge in the markets where we compete.
But there are economic headwinds, too—higher energy
prices, falling consumer confidence and tightening credit
among them. These factors have depressed the stock
values of most companies in the apparel sector, including
ours, despite our outstanding performance. We can’t
control that, of course. So we’re putting our energies into
what we know best—building leading lifestyle brands that
excite consumers around the world, and executing on
clearly defined goals and strategies.
Given those economic conditions, can VF continue
to grow?
EW: We definitely think so. In fact, we’re forecasting
9% revenue growth in 2008, split about evenly between
organic growth and the revenue contributions from
companies we acquired in 2007. Because of VF’s balance
and diversity, we’re not dependent on any one customer,
geography, channel of distribution or product category for
growth. Rather, we have a wide array of initiatives across
our businesses—and across the globe—that should provide
solid opportunities for growth in 2008 and beyond.
Mackey, VF has never been stronger. Why did you
step down as CEO at the end of the year?
MM: My plan was always to hand over the reins when I felt
that the best times were still ahead for VF—and I certainly
believe that is the case today. I believe the plan we’ve put
together for the next five years is even stronger than the
one we launched back in 2004. I also have great confidence
in the leadership team and believe they have the talent and
expertise required to take VF to the next level.
Is the management transition now complete?
What will be your role going forward?
MM: Eric has absolutely hit the ground running as
president and CEO, and the transition has been extremely
smooth. I will continue to be closely involved in Board
activities, leadership development, acquisitions and
business development.
Eric, how will VF’s vision or business strategy change
under your leadership?
EW: We’re on the right course and we intend to stay on it.
Mackey and I have been—and still are—very aligned on
both our vision for the future of VF and the core growth
drivers that bring that vision to life. We have a proven
business model that has led to success far exceeding our
original goals. And what excites me most is the potential
our team sees for VF as we continue to execute this model
over the coming years.
‘05 ‘06 ‘07
REVENUES
(DOLLARS IN MILLIONS)
5,654
7,219
6,216
DIVIDENDS
PER SHARE
(DOLLARS)
2.23
1.10
1.94
RETURN ON
CAPITAL
(PERCENT)
14.8
14.2
14.7
CASH PROVIDED
BY OPERATIONS
(DOLLARS IN MILLIONS)
834
534
454
DEBT TO CAPITAL
RATIO
(PERCENT)
26.4
22.6
19.5
OPERATING
MARGIN
(PERCENT TO REVENUES)
13.6
13.4
13.3
“ Consumers continue to seek distinctive
brands that enhance their lives and make a
statement about who they are—or who they
aspire to be. That’s what VF is all about.”
— Eric Wiseman
VF CORPORATION | 40
VF CORPORATION | 41