The iconic Vans brand is seeing its profits racing down fast as competition heats up in the sneaker category.
What’s going on here?
Vans innovation has stalled, and consumer demand is veering to more traditional sneakers. Join Robin and Shelley as they debate whether new VF Corp leadership can turn the business around for Vans and the rest of the VF brands. Or will it be another tough year for the company?
If Q1 results are any predictor, it’s going to be a rough ride with Vans revenue dropping 22% and wholesale down a whopping 40%. Who can save the iconic Vans brand? And how?
For more strategic insights and compelling content, visit TheRobinReport.com, where you can read, watch, and listen to content from Robin Lewis and other retail industry experts, and be sure to follow us on LinkedIn and Twitter.
The iconic Vans brand is seeing its profits racing down fast as competition heats up in the sneaker category.
What’s going on here?
Vans innovation has stalled, and consumer demand is veering to more traditional sneakers. Join Robin and Shelley as they debate whether new VF Corp leadership can turn the business around for Vans and the rest of the VF brands. Or will it be another tough year for the company?
If Q1 results are any predictor, it’s going to be a rough ride with Vans revenue dropping 22% and wholesale down a whopping 40%. Who can save the iconic Vans brand? And how?
For more strategic insights and compelling content, visit TheRobinReport.com, where you can read, watch, and listen to content from Robin Lewis and other retail industry experts, and be sure to follow us on LinkedIn and Twitter.
Hi everybody and thanks for joining our weekly podcast. I'm Robin Lewis, founder and CEO of Robin Report which, by the way, is much more than a daily report. It really is a knowledge platform from which we communicate thought leadership on various strategic topics. Yes, through our reports daily reports, but also on these podcasts, and we do webinars and eventually, some live events, I hope, and along with Shelly Kohan, my weekly podcast partner, and, by the way, she's also a professor at the Fashion Institute of Technology.
Speaker 1:Anyway, shelly and I welcome you to our conversation on the topic of is VF Corporation going to be skated into a disaster by vans, which is their big brand? You know, as you know, shelly, vf Corporation was like my alma mater from 1980 to 1990. I was, I was their business development strategy guy and during that decade, which was their period of three huge transformative repositioning moves Number one, the beginning of outsourcing manufacturing. Of course, the whole industry was going through that about that time. Number two, the beginning of the tech era. And three, the beginning of repositioning their portfolio brands such as Vanity Fair, inam and Apparel, janssen Swimware, wrangler and Lee Jeans, transforming that to a two decade series of brand acquisitions such as the North Face, timberland, vans, transport, transport, backpacks and other athletic and athleisure lifestyle brands. But now, shelly, let's put our topic into context. Vf's 2022 revenue was 11.8 billion. Of that total portfolio revenue of all their brands, vans accounted for 4.1 billion, or about 30% of.
Speaker 1:VF's total. So right there, you know, they cut problems and given the recent downward trajectory that Vans has been taking, I would think that the C-suite in VF is feeding a lot of Ajida. If not, they need to wake up.
Speaker 2:Well, I think you're spot on in terms of the concerns for Vans. I mean, even if you went back and looked at their 2023 revenue, it's down considerably. We saw that it is a big problem. Vans was down also 11.5% in 2023 compared to the previous year. And if you look at the regions, asia Pacific is down 23%, while Americas and Europe's are down like 9 and 10%. So, but even more concerning than the revenue drop is this drop in profit. So the way that VF Corp looks at their business is they have a category called active, which is Vans, supreme Kipling, and the active segment profits drop 33%. These are profits, which is just crazy. And then also, when you look at the VF Corp portfolio and you look at the major brands that they have, the only major brand of VF Corp that is up is North Face, and so they're up like 11% over last year's revenue if you're looking at full year. But when you look at that total outdoor segment, which includes North Face and a couple of other brands, their profits were also down 1.3%.
Speaker 2:So you know and just to add one more category that they look at the work group. You know how they have Dickies and Timberland Pro as part of their work apparel, as they call it. Those profits were down 37%.
Speaker 1:Wow.
Speaker 2:So my assessment would be VF Corp has more concerns than just Vans, but today we're going to focus on Vans. Well, I agree.
Speaker 1:But the quick snapshot of VF is a good context, shelley, and to know that it's not just Vans that's in trouble. In fact, activist investor engaged capital was pushing the company to conduct a strategic review of all the brands in its portfolio except for Vans and the North Face, and what that indicates to me is they suggest several of their brands may be up for sale, meaning they were sure Wow, yeah, yeah, think about it. That's crazy.
Speaker 2:Really.
Speaker 1:What it means is they will focus on turning the Vans band around, which they've got to do, as big as it is in that portfolio, and continuing to strengthen the North Face, which is still winning for them. But on to Vans, which I do believe. I do believe it has the weight to bring VF down if they can't turn it around. You look at how big their you know, the biggest share they have with the total. Anyway, how bad are things at Vans? Well, shelley, one of your fellow contributors to Forbes and a good friend of mine in the industry icon, walter Loeb, gave us some insights in his recent article. First of all, vans positions its brand as casual, athletic and, according to research by Sir Kanna, while sales for running shoes like Nike, adidas, huma, valence and others have increased 6% from January 2023 to August 2023, overall footwear sales declined 3% in that same period, and casual shoes were a big part of that decline, because, as the world goes back to work, of course they are buying more formal shoes, right?
Speaker 2:Well, yeah, robin, and it's a good point, with people heading back to work and, of course, more socialization, although, with that said, many of our younger generations are wearing sneakers to work. So, but hot off the press is, vogue does their top shoe trends for fall and I have to say the black court shoe is back. So these are these black heels, and Vogue said the most ubiquitous heel on the catwalks at fall were these sleek, chic, streamlined heels. So they're going back into the workforce, which is gonna dress it up a little bit. Also noted were the continuation of the trend of the ballerina shoes, now a little more pointed than ever how shoes.
Speaker 2:So think Burke and Stock on how shoes, wedges, mary Jane's and Boots. So for men, it's the big trends are loafers, sneakers and lace ups, not to mention the new trend of golf sneaker shoes. The competition in this casual shoe space has just heated up for sure, and I'll also add that, in this tech era today, it spawned all these young, entrepreneurial kids that are able to hop on the internet, get some investor funding and all of a sudden, all these new brands are popping up every day and the footwear category is just getting very crowded.
Speaker 2:So, we have Hoka and APL, both launched in 2009, on racing in 2010, on cloud 2010,. Toppo Athletic 2013, noble 2015, kizick 2017. And the list just goes on and on.
Speaker 1:Yeah, all these brands, though you know what's amazing, michelle, I gotta say this quickly I don't know. Maybe it's because I'm getting old and these young kids are taking over. I don't know, these brands, there's no meaning in them. Kizick, noble, I mean. Anyway, I had to ventilate a little bit there.
Speaker 2:Yeah, well, just let me say that here's a quick story, Robb. So these cool brands what they offer is they're highly innovative. So I was talking to Ken you know Ken, he does the strategic partnership for ASG and ShoeGirderman and he's telling me that the reason he bought Hoka Shoe is because of the carbon plate. So he said they also were the most interesting looking from a design perspective. So Ken is a trail runner and when the Hoka Shoe came out, you know he was very interested in some of its innovative materials. But after about 200 miles of running he's a big runner, he's a trail runner that shoe wore out and then he moved it over to Ultra ALTRA, which is the standard brand for people that are ultra runners. So Ultra was founded in 2009, like all the other brands. So the point being is that consumers today they are turning to more innovative and design specific shoes. So no surprise.
Speaker 1:I got it.
Speaker 2:In August. You know, if you look at August, vf Corp reported the second quarter, that Vans quarterly sales dropped 22% compared to the previous year and the wholesale side of the business also dropped in the Americas by 40%. Even their direct sales were down 7%. So they have this kind of triple whammy. One, the wholesale footwell category is down trending. Two, vans, as a casual athletic is in I don't know no brand's land, either running shoe or whatever it is. And number three, they don't stack up against all these cool newbies that I just mentioned. Yeah, I get it. When you think about the Vans revenue, you know that's, you know more than 30% of the revenues, you know total. So it's not good.
Speaker 1:Not good for sure.
Speaker 1:And, by the way, some of the steps they say they are making, like reducing the number of stock keeping units in stores and a relaunch of Vans website and a sharper focus on products in demand, I don't know, Shelley, but I don't see much energy in those words or in those moves.
Speaker 1:And I'm going to tell you, Shelley, what you've heard before from me I think Vans has a brand problem, not just a product issue or design issue. And what I've called out about Gap many times A&F in the Michael Jeffries phase, not today, because Fran Horowitz has done an incredible job turning that brand around. Anyway, what I'm saying is and there are other, but simply those brands once beloved loyalists simply grew out of the brand and their younger brothers and sisters behind them simply had no interest in copying what their now older siblings left for something new, you know, like leaving gap and moving on to Brooks Brothers, Anyway. And so the younger kids they are looking for their own idea of cool and of course, that's why all the new brands, as you mentioned above, were launched in the 2000s.
Speaker 2:Yeah, well, you know, perhaps the new leadership at VF Corp and some additional push from the activists will help kind of revive the brands and infuse some energy into the different business segments. As you know, july of this year Bracken Daryl took over as president and CEO and he's known for his work in reviving brands such as Old Spice, gillette, braun, kitchenaid and Whirlpool. And interestingly, he actually has a tech background. He spent about 10 years at Logitech and where he added 20 new product categories and doubled the revenue there. So his focus was new and innovative products and elevating the design aspects of products. So VF Corp has tried this before. You remember, robin, when Steve Randell brought Supreme and to kind of revive and put some life into VF Corp, they brought, they brought Supreme into the family. But how's that worked out? I'm sure you have an opinion on that one. You know I'm setting you up, robin, but Supreme is part of that active segment that I mentioned that is down profit wise pretty significantly.
Speaker 1:Yeah Well, as you know you're right, shelley, and I think VF does it does have another brand issue with Supreme that we talked about. That brand, as we all know, was sizzling when they acquired it. However, with Supreme, I'm not so sure that young consumers left that brand. I think it had more to do about a culture clash, with Supreme coming under pressure to accelerate growth, and I've said in the past that the VF culture was like very conservative, cautious, you know, frugal, you know. It's like bankers, so you know.
Speaker 1:And whereas Supreme's culture, which of course matched their cool consumers, was likely less strategic and more tactical, kind of like just do it dude, so you know, the advanced once cool culture fall under the weight of VF trying to control it under their set of rules and under their culture? Or is it just similar to what happened to the gap and others? So, shelley, you have two kids right and that might be examples of growing out of the once cool brands you know to find new ones. Did your kids have vans and, if so, can you tell us about their view of that brand?
Speaker 2:Yeah, interesting Robin. Yes, so Ben, my son, who's actually a skateboarder, so obviously love, love bands. You know he was very into bands in middle school but now that he's in college he's in his second year at college now he says he doesn't really look for new bands, shoes. So, and you know he's in the design accessory program, footwear design program at FIT, so he's a bit opinionated and knows what he's talking about. When it comes to, you know, shoes, but he said so I asked him about he said it's a great. So Vans is a great demographic for middle schoolers and high schoolers, but not really after that, which, by the way, robin, you had already mentioned. He also said bands aren't that comfortable and they wear out easier than like Adidas skate shoes. So he said it's a basic shoe, not a lot of style.
Speaker 2:My other son, rex, who's three years younger, would wear Vans when his brother did so back when he was in elementary. My older son was in middle school but he really hasn't worn them in high school at all. But it's interesting, robin, when I asked him about Vans my younger son he says he likes them and he wears them but honestly he hasn't bought them in a while. So, like he said the older son liked Vans, the younger one did, but then it didn't translate. You know down and stick with the younger son. So Vans is very well known and popular among Gen Z consumers in the United States. So one report showed that you know 39% of Gen Z consumers my son is in, my sons are in that group who own sneakers, own Vans.
Speaker 1:So Okay, well, that's a good, you know, realistic, in real time kind of commentary on this, so that's good. Another thing athletic shoes continue to be popular skate shoes, which are Vans. Of course, vans specialty are not in demand and the intensity of and by the way it may be not in demand Vans, then the brand name Vans, you know, is obviously very high. Percentage of people around the world know that brand, but but? But the skate shoes today are not in demand and the intensity of competition that I mentioned Vans has. Maybe it reveals a lack of understanding the evolving marketplace.
Speaker 2:Yeah, and I would have to say that the global skateboard market as a whole, according to BusinessWire, is actually valued at 2.8 billion in 2022, and is projected to grow to over 4 billion by 2030. So that's a you know cagger of 4.4% on revenue growth. So the trend to be outside the growth of fitness, both are factors that influence the market in a positive way. Also, you have the X Games Olympics Street League skateboarding, which is an international skateboarding tournament series, keeps this interest high with the skating board community. But, on the other hand I think this is your point, robin, that you were making is that when you look at kind of this global footwear market, the sneaker segment has the highest growth potential, with projections of growing 35% 35% from 2022 to 2028.
Speaker 1:So I think Vans.
Speaker 2:I know and I think Vans is missing the mark despite the growth in the skateboard market and it's not currently reaping the benefits of the growth of the sneaker market.
Speaker 1:So they're missing out on both yeah double trouble, double trouble, and I agree, shelley. And as Lo said, one might ask if Vans management really understands current customer demand. Maybe the company should change instead of selling less SKUs. Walter may be on to something there, shelley, something larger in the problem space at VF, as I mentioned before about Supreme having an entirely different culture and how VF is perhaps driving that brand into the ground, so too their view on Vans may not be all that sharp either. Lo asked two experts about their use of athletic shoes. So he says Miss R quote unquote not naming them likes Vans shoes because of the reasonable price. But she laments that there are no new designs while other shoe companies have them.
Speaker 2:So that's what my son said. That's exactly what my son said.
Speaker 1:So there you go, it's confirming. And now Mr F quote unquote sees Vans as an old fashion brand, almost classic. He sees current running shoes as being lighter, cheaper. With good new technology. Some of the brands are cheaper. The classic brand skate shoe is just not in demand now. So Loeb concluded in that article if the demand for athletic shoes would now be as strong as it was during the pandemic, this article, meaning the one he wrote, would be irrelevant. Right, it's true, yeah. So, however he says. However, we fear that there may be fewer athletic shoes in our future, with key lines like Nike, adidas and Puma leading the way. Then he says Vans must change and add athletic shoes that the customer wants, a product that consumers want. What a novel idea, shelley, right?
Speaker 2:God, Well I'm not laughing.
Speaker 1:Paul Waltsie certainly knows what he's saying. The VF Corporation I was fortunate enough to spend 10 years with, would not make a move, any move, without checking in with the consumer. So anyway, what do you think, shelley?
Speaker 2:Well, interestingly, rob, and not to throw this back at you, but not only did you work for them, you wrote about them, and once upon a time. Remember VF Corp was one of our retail radicals. That was back in 2020. And what we said in the article is there's three VF powerful competitive assets and advantages that came out of the 80s that powered them through the pandemic. One was consumer-centric. There you go the second one consumer responses there you go the first one was innovative culture.
Speaker 2:But, honestly, rob and I'm not seeing these powerful assets today. What happened in three years since 2020? And here's another thing, not to go off on a tangent. But here's another thing. I don't get you kind of hinted this earlier, but Vans has great brand equity.
Speaker 1:Yeah, that's what I'm saying, yeah.
Speaker 2:The brand is very recognizable, especially in the US market. So if you look at brand recognition scores, of course Nike is at the top at 94%, and then Adidas and Puma are sitting somewhere around in the 90s, and then you have Reebok at 89,. Vans is sitting at number 10 with 80% brand recognition in 2022.
Speaker 1:Well, there you go, yeah.
Speaker 2:It's crazy. So a survey by Consumer Insights of ages between 18 and 64. And Vans also had a 21% usage rate in that same survey, meaning that those that participated in the survey actually owned a pair of Vans. But they scored low on loyalty. And they scored very low and this is important, rob and they scored very low on buzz, meaning buzz about the brand. The social sentiment is not there. It only scored like 15%. So I know it's one survey with 1,200 respondents, but I think you get my point. They have a goldmine of strong brand recognition today. So what will become of Vans? They have not innovated any styles or fabrics or designs in a long time. Like you said, they're falling behind these other digital native brands and I'm just personally not excited. When I walk into a Vans store and neither of my kids they're not buying anything.
Speaker 1:So that's a killer? Yeah, go ahead.
Speaker 2:Yeah, yeah, all those things that you mentioned. So you mentioned all these things that they're doing to fix the brand, quote, unquote. But these are all operational things. You can't operate yourself into a profit and you can't operate yourself into the hearts of the consumer. Well, there's the innovation, where's the panache, the emotional connection that's going to drive consumers back to the brand.
Speaker 1:Well, I'll tell you, shelley, you amen, you raise a major point. And you raise a major point which also leads me to another major question Bracken, darrell Bracken, who no, not to be glib, and I'm not insulting him at all, but his background of arguable success in turning businesses around was, for several industries other than apparel. I knew you were going to go down here.
Speaker 1:Absolutely. How about Old Spice? You want to stick that logo on a pair of Vans shoes? Anyway, I'm not going to get funny here, and we know what that rodeo looks like. Aka Gap Inc. How many non-apparel retail experienced CEOs? Oh, about six.
Speaker 2:Yeah, yeah.
Speaker 1:Rendell stepped down last December when the company lowered its fiscal 2023 sales and profits guidance. They cited weak consumer demand, especially in North America. So one would also need to ask how responsible was Rendell for the decline in VF's brands? Yes, one only would ask how Should we Taiwan and Taiwan worry to sell the product to anyone else?
Speaker 2:Yep, I remember, and the company had a massive inventory problem coming into this year, 2023. Inventories were 62% higher in March than the previous year, with sales down 2%. And get this. You know what the profits were down 91% oh my god, that's incredible.
Speaker 1:Never would have happened ten years that I was there.
Speaker 2:Anyway, go ahead and then in May the F4 announced it didn't expect expect VAMS to return to its growth until the second half of 2024.
Speaker 1:Well, let's hope they can meet that target. That's pretty, pretty soon here, isn't it? I mean the apparel cycles? It doesn't seem me either. Anyway, we'll see, we'll see. Anyway, to wrap it up, shelley, I'm I guess the word term I'd use is I am gobb snack, smacked by by their dilemma. You know, give my short, give my history with them, and now to see the really rocking hard spot they're in, I just say wow. And of course, now, under an activist pressure and a new leader with no experience in footwear retailing, figuring out what to do with all the brands, including the priority of getting the Vans brand back on a growth trajectory. And about that challenge, is Kevin Bailey parachuting that name out. Kevin Bailey is. Kevin Bailey was a global brand president of Vans with more than 25 years of brand leadership and retail experience, 13 of which have been with VF. Is he the right guy to bring back Vans to its glory? Shelley, let's hope Kevin is the right guy and if he said that much of experience in Vans and VF, maybe he will be, I hope.
Speaker 2:I hope he will be. I like Vans, I like the brand. I hope it gets you by yeah for our listeners. You can find more of our podcast on Apple, spotify, buzzfraud and the robin report calm and please follow us on social media.
Speaker 1:Link in with us for the latest thoughts about the industry and I want to thank you one last time for joining us today and, as I say every week, if any of you have a topic you would like Shelley and I to cover, just shoot me an email at robin, at the robin report calm, thank you.