VF Corp. in 2018 said it would split the company into two companies. One would focus on footwear such as the Vans brand, outdoor wear brands such as the Northface and Timberland, as well as the work category that include Dickie and Red Kap, which have accounted for most of the company’s growth. It would retain the VF Corp. name and set up its headquarters in Denver. The other company would sell denim brands Wrangler, Lee, Rustler, and Rock & Republic, which have struggled as retailers have promoted store brands. Its headquarters would be in VF Corp.’s hometown, Greensboro, North Carolina.

The company expected the split to be completed in the first half of 2019.

Operations

VF operates three main business segments: Outdoor & Action Sports is the largest at more than 70% of total sales followed by Jeanswear (more than 20%), and Imagewear (more than 5%).

V.F.'s Outdoor & Action Sports segment has a closet of 10 popular outdoor brands across the apparel, footwear, equipment, backpacks, luggage and accessories categories. Vans, a youth counterculture brand, is the segment's biggest earner and sells shoes and clothing through 650 VF-owned retail units, online, and through distributors. The North Face, the next biggest brand, sells tents, sleeping bags, backpacks, and other such outdoor accessories alongside its rugged apparel and footwear lines. The segment also sells handbags, luggage, backpacks, women's activewear, and surf-inspired footwear across its various other brands.

The Jeanswear segment sells jeans and related clothing and accessories through a handful of brands. In the US, the Lee brand is sold through mid-tier department stores and the Rustler and Rider by Lee brands are sold through regional discount stores. Outside the US, Wrangler and Lee are sold as high-end brands.

The Imagewear segment provides uniforms and career occupational apparel for workers in North America and internationally under the Dickies and Red Kap brands (work apparel and footwear), Bulwark and Workrite brands (flame resistant and protective apparel primarily for the petrochemical, utility, and mining industries), the Walls Brand (outdoor workwear), the Kodiak brand (work and lifestyle footwear), the Terra brand (work footwear) and the Horace Small brand (apparel for law enforcement and public safety personnel). It includes a wide range of workwear pants, coveralls, shirts, medical scrubs, outerwear, footwear and accessories .

Geographic Reach

VF Corp. rings up about 55% of its sales in the US, while the remainder mostly comes from Europe. It also sells in Asia, Canada, Mexico, and Latin America. The apparel maker has about 20 manufacturing plants in the US, Mexico, Central and South America, the Caribbean, Europe, and the Middle East.

The company operates more than 35 distribution centers primarily in the U.S., Argentina, Belgium, Canada, Chile, China, Mexico, the Netherlands, and the UK.

Sales and Marketing

VF makes sales through specialty stores, department stores, national chains, mass merchants and its direct-to-consumer (DTC) operations. The company makes direct-to-customer sales, about 30% of revenue, through owned-operated stores, concession retail stores, and online. It generates a significant chunk of its sales through third-party retail chains. V.F.'s 10 largest customers account for about 20% of sales.

The apparel maker advertises in trade publications and on radio and television. Its digital initiatives include social media, mobile platforms, and the internet.

Financial Performance

VF Corp.’s revenue has fluctuated in recent years, but has surpassed $11.8 billion in two of the past four years. Net income consistently topped $1 billion since 2012 before dropping below the mark in 2017.

In 2017, VF’s revenue rose 7% to $11.8 billion compared to 2016. Sales of the Outdoor & Action Sports segment increased 8% in 2017 while Jeanswear revenue slipped 3%. In terms of channels, direct-to-consumer revenue rose 17%, accounting for about a third of total revenue in 2017, and ecommerce revenue jumped 34% in 2017. International sales increased 12% and accounted for more than 40% of VF’s revenue in 2017.

VF’s net income fell to about $615 million in 2018 from about $1 billion in 2016. The company paid about $490 million more in US income tax in 2017 than 2016 because of the US Tax Cuts and Jobs Act. Income before tax was about $1.4 billion in 2017 compared to about $1.3 billion in 2016.

Cash generated by operations was flat at about $1.5 billion in 2016 and 2017. VF repurchased $1.2 billion of stock and paid about $685 million in dividends in 2017.

Strategy

The breakup of VF into a company for footwear and outdoor apparel and a company that sells jeans allows each to focus on its specific markets. VF had already sold the Nautica brand when it announced the split in August 2018. Without denim, VF said it would have flexibility to make acquisitions and explore new businesses. Besides the active and outdoor brands, VF would retain the work-oriented brands such as Dickies, Red Kap, and Kodiak. It expects revenue of about $11 billion a year. 

The denim company’s revenue would be around $2.5 billion from the Lee, Wrangler, Rock & Republic, and Rustler brands. The company will look to increase sales in Asia, particularly China. It intends to cut costs and streamline operations and scout for opportunities to add to its product line.

Mergers and Acquisitions

In early 2018 VF bought New Zealand-based Icebreaker to a complement VF’s Smartwool brand. The two brands position VF as a leader in the Merino wool and natural fiber categories.  

Company Background

The gear-and-apparel maker has invested heavily in acquisitions to further build its outdoor and action sports business, which has grown to account for more than 50% of sales. V.F. in September 2011 acquired global footwear maker Timberland for $2 billion. Marking the biggest acquisition in the company's history, V.F. was enticed by Timberland's overseas presence and its strong growth during the past decade.

In 2010, on the wholesaling side V.F. took control of its Vans-branded products marketing venture in Mexico. The roughly $30 million purchase also put V.F. in charge of Vans retail stores.

V.F., founded in 1899, is controlled in part by trusts established by its late founder John Barbey.