VF Corp Aka The Deathstar And Phoebe Philo's Return
Attempting to do shorter notes, so I can publish more often...
Revenge of the Sith
VF Corp.’s woes continue with revenues down 2% to $3B during Q2, and Vans business down 23%. The company also withdrew its prior guidance and like a dagger to the heart of shareholders cut its dividend by 70%, all of which spurred multiple downgrades, leading to the establishment of a fresh five-year low. The stock is now down approximately 53% on the year.
On top of all the crappy financial news, the company announced Vans president Kevin Bailey is stepping down. Bailey previously served as the president of Vans from 2009-2016, and was brought on to bring back some of the brand’s old magic when he stepped back into the role in April 2022. Suffice to say, he did not achieve his goals.
The company’s difficulties have drawn in activist investors, Legion Partners and Engaged Capital. Both want VF Corp. to make adjustments to how it spends money, with Engaged Capital allegedly pushing for the company to strategically review and possibly sell Timberland, Dickies and Supreme to help pay off massive dept of $5.6B.
Engaged Capital was particularly critical of VF Corp.’s moves under former CEO Steve Rendle’s leadership, including his decision to relocate company headquarters from Greensboro, North Carolina to Denver, Colorado. Describing the headquarters as The Death Star (!!), the investment firm, according to Retail Dive, noted the move was responsible for “massive spend and significant employee turnover.”
Further, Rendle’s reorganization of the business was described as “failed” and “overly complex,” and the $2.1 billion acquisition of streetwear OG Supreme in 2020 was “the culmination of a flawed strategy” that expanded its debt. (Note: Supreme had a good quarter. Revenue was up “double digits,” aided by the opening of a new store in Seoul. Also, no surprise, but no mention of the Tremaine Emory debacle.)
Things are down so bad, I almost feel bad making my usual snarky remarks about management. Key word “almost” because I can’t help but point out the closing statement by brand new CEO Bracken Darrell (who spent 10 years as CEO of Logitech International prior to VF Corp.) whose newbie mea culpa I found to be sort of odd given the the deep hole he needs to lead the brand out of, but at the same time endearing because of how non-corporate it was. Adopting all the feels of the Gen Z audience VF Corp. targets, the 60-year-old Darrell confessed, “This was my first call. I was a little nervous. I think it went okay.”
Darrell quickly course corrected and finished on a more serious yawn-inducing note, adding, “I'm looking for feedback but let me be clear, we are intensely, intensely committed to really continue to be a great company for our customers, making our financial performance a lot better and attracting and retaining more great people over time, and I promise you we'll come back with a more comprehensive strategy over time. I won't commit an exact date yet but it's coming.”
Ending on my own serious note, I do hope VF Corp. turns things around. I know people who work there and they are great and deserve the best! I think it’s awesome that Vans had the smarts to hire ex-HLZBLZ designer Lanie Alabanza-Barcena as the apparel and accessory designer for the soon to be relaunched OTW division, and as someone pointed out to me on Twitter, the new partnership with Advisory Board Crystals hints at green shoots withing the design department. Hopefully Vans will water those fledgling ideas and protect them from the usual talentless but territorial hacks every large company employs.
Long Live the King!
In the lead up to Phoebe Philo’s debut collection I was prepared be underwhelmed. Nothing personal, she is a singular talent and I very much liked her as the lead at Celine; the issue is that we’re clearly in this in-between, reckoning space whose energy is akin to that of windless waters. During these challenging times, the wheat shall be neatly separated from the chaff, so that innovative new brands and well-run legacy brands will grow stronger while the weak will begin a multi-year/decades walk down a long and winding path that ends—if they’re fortunate—with an Authentic Brand Group or equivalent license deal.
In the case of Philo, she calmly entered the room and killed it not just with her designs, but also her Tumblr-nostalgic campaign images along with her decision to limit sales to a pared-down ecommerce site. All of her choices, including true high-end pricing, point at a different way of doing luxury, which is less about mega celebrity and blingy pieces and more about making a real connection with the target customer.
That’s not to say celebrity and influencers don’t matter, but it’s pretty obvious in the upcoming cycle they will matter less than, say, 10 years ago, in no small part because the return-on-investment simply won’t be what it used to be.
Benefiting from minority investment by LVMH, the label went live on Monday with 104 pieces ranging in prices from $450 for sunglasses up to $25K for a shearling coat. At the moment, approximately 70% of the collection is sold out, setting up Phoebe Philo as a baby version of the Hermès label that LVMH tried to but wasn’t able to.
Check out some of my favorite photos from the debut collection below:
