Vans is not surprised at its most recent, and disappointing, financial results—parent company VF Corp. (NYSE: VFC) reported first quarter revenue was down 22% to $738 million for the Costa Mesa retailer—and says it expects the current slowdown to last longer than planned.
“While the brand’s overall performance was largely anticipated, it’s not where we should be and we remain intently focused on the actions to turn around the brand,” VF Corp. Chief Financial Officer Matt Puckett told analysts on an earnings call this month.
Actions taken to strengthen the skateboarding-inspired shoe and apparel company’s performance have included creating more relevant products, increasing consumer interaction, and improving go-to-market strategies.
These moves have resulted in a successful Paris Men’s Fashion Week debut for an upcoming 2024 footwear collection and doubling its Vans Family membership count to almost 29 million in the last two years, officials said.
Vans also said it will complete the reduction of in-store product this August, a strategy originally tested at an Irvine location late last year. It’s been aiming for a 20% to 30% stock-keeping-unit reduction in U.S. stores.
However, progress remains stagnant as wholesale partners place future orders with caution.
“All of our brands are having some impact from what’s happening in the wholesale channel particularly in the U.S. as wholesalers are resetting inventories,” Puckett said.
Vans wholesale business was down 40% in the first quarter.
“When you have a business that’s not selling through, you give them even more reason to potentially be very cautious and pull back and we’re seeing that certainly in the Vans business,” he said.
Vans’ store count is over 2,000 including company-owned locations, distributors and international partners.
DTC Drive
Vans executives believe that its direct-to-consumer (DTC) business will ultimately drive future growth.
Officials took “mid-single digit” growth in DTC channels as a sign of “resilient consumer demand.”
“Consumers were really the piece that we needed to put at the front of our decision making,” Vans President Kevin Bailey told analysts.
Bailey has on past earnings calls noted the over-dependence on the retailer’s classic shoe lines, and the need to invest in products that have shown sales growth.
Vans has seen new items such as the UltraRange and MTE sneaker silhouettes outperform by double-digits in the footwear category and even existing collections have increased.
Bailey said that it will be some time before these products offset any declines.
“We’re setting up the brand for long-term profitable growth, and we’re not going to sacrifice that objective,” Puckett said.
New Parent CEO
Vans’ turnaround plans remain a top priority for VF Corp., which bought the local company in 2004 for nearly $400 million. Despite recent slowdowns, it remains the parent’s largest subsidiary.
The Denver-based parent company reported total first-quarter revenue of $2.1 billion, off 8% compared to a year ago.
“Our number one financial objective is to return VF to our historical balance sheet strength,” Puckett said.
A new chief executive, 10-year Logitech CEO Braken Darrell, was brought on in July.
