- Recall that VF Corporation’s long-time CEO unexpectedly left the company in December. The company's December-end quarter results press release quotes Interim President and CEO Benno Dorer saying, “we are shifting resource priorities across the Company, including by reducing the dividend, exploring the sale of non-core assets, cutting costs, and eliminating non-strategic spend.”
- Given VF Corporation's history as an "execution machine", it's a surprise that the company is still struggling with long lead times for distribution and logistics, resulting in higher order cancellations (they can’t meet fill rate requirements) and very high inventory and working capital levels.
- The company's divisional details show that The North Face is holding onto growth, while Vans continues to falter with sales down -13% in the U.S. This is a trend that is expected to continue in the near term.
- VF Corp management acknowledges that Vans’ issues are the result of ineffective internal execution; we have highlighted that they are losing meaningful market share to brands like Nike, Converse, Cariuma, New Balance, and others. In December, Vans brought on a new Chief Product and Merchandising Officer and a new Chief Digital Officer.
- Management called out weak store traffic as a headwind for Vans. The chart below shows Vans versus Foot Locker, which represents a proxy for footwear retail category. Of note, this is only for single-story street-facing locations. As such, we would not expect the absolute level of traffic declines to be representative of averages for all U.S. locations for Vans and Foot Locker. However, we believe the relative relationship between the two to be a good representation of Vans’ brand challenges.
- The figure below shows Google search interest for Vans and New Balance over the past five years. Incredibly, Vans has slid by over -50% and New Balance now exceeds Vans.
Source: Google Trends