VFC Sets Big Plans for Asia Pacific
To expand its global presence, V.F. Corporation (VFC) came up with massive plans for Asia Pacific, one of the fastest growing regions in the world. At a meeting in Shanghai, the company stated that it is aiming to add $1.1 billion of sales from the Asia Pacific region over tenure of five years, taking the total regional sales to $2 billion mark by 2017. This represents an annual growth of 17% from projected sales of $900 million for full year 2012.
Further, the company continues to expect a revenue growth of 20% in Asia while the same from Europe is anticipated to increase in the low-single-digit range in 2012. Since 2007, V.F. Corp.’s revenues from the Asia Pacific region have grown five-folds, whereas its total international sales contribute approximately 37% towards total revenue. The company now believes its international sales will add about 45% to the total revenue by 2017.
Geographical Growth Strategy
Per the company, China will play a big role in accomplishing its goal with contributing approximately 60% of total Asia Pacific revenue by 2017 from current contribution of 50%. This will represent an annual growth of 21% over a period of five years. To achieve this end, V.F. Corp. will increase its store count to 6,000 from the current 2,300 by 2017. Moreover, outdoor, youth culture, jeanswear and casual bags will be the key categories of this strategy.
The company expects revenue from India to grow at an annual rate of 22% over a period of five years. Moreover, India’s contribution toward the Asia Pacific revenue is expected to reach 10% by 2017, from 8% at present. In addition, revenues in Japan and Korea are anticipated to grow at an annual rate of 8% and 52%, respectively.
Brand-Wise Growth Strategy
V.F. Corp. expects its Timberland brand’s revenue to grow at an annual rate of 13% and add $230 million in the Asia Pacific regions sales over tenure of five years. The company’s iconic premium denim brand Lee is anticipated to add approximately $150 million in the region’s sales at an annual growth of 12% by 2017.
The company’s The North Face brand will add $340 million towards Asia Pacific revenue in the next five years, representing an annual growth of 26%. Expecting to grow at an annualized rate of 22%, V.F. Corp.’s Vans brand may add nearly $200 million in the region’s sales in the coming five years. While the Kipling brand is expected to add about $80 million at an annual growth of 18%.
Our Recommendation
We expect V.F. Corp. to continue delivering on its potential, given the proven performance across its segments, its focus to build brand image via incremental consumer research and marketing spending.
Moreover, we believe that V.F. Corp.’s policy to acquire businesses that provide strategic opportunities and exiting businesses having lower potential have helped the company drive growth while improving profitability.
Based in Greensboro, North Carolina, V.F. Corp. is one of the world's largest apparel companies. The company, together with its subsidiaries, engages in the design, manufacture, and marketing of branded apparel and related products in the United States and internationally. Major competitors of the company are Gap Inc. (GPS) and Sears Holdings Corporation (SHLD).
V.F. Corp. currently retains a short term Zacks #2 Rank (Buy rating). Currently, we are maintaining a long-term Neutral recommendation on the stock.
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