Timberland and Vans owner eyes acquisitions despite uncertainty
VF chief executive says it could be an opportune time for deals
The company behind Timberland, Vans and The North Face is on the lookout for further acquisitions despite coronavirus uncertainty, saying it could be a good time to expand its collection of clothing, footwear and accessories brands.
“In times like this, some of the greatest returns could be generated through acquiring,” Steve Rendle, chairman and chief executive of New York-listed VF Corp, said in an interview.
While he made clear that organic growth was VF’s biggest priority, Mr Rendle said he saw potential opportunities to buy smaller rivals in subsectors including athleisure, outdoor and activewear.
Analysts said Canada Goose, Gap’s Athleta and Columbia Sportswear could be among the types of targets for VF, which has a market capitalisation of $24bn. Mr Rendle did not comment on any particular company.
Coronavirus has caused a slump in global dealmaking, and the total mergers and acquisitions value of $955bn so far in 2020 is the lowest since 2013. There have been some transactions in sectors such as technology, but concern about the outlook for consumer spending has made buyers reluctant to swoop on retail and consumer companies. Total deal value in the sector of $96bn is the slowest since 2010, according to Refinitiv.
VF traces its roots back to 1899, when the company was established in Pennsylvania as a glove and mitten maker. It later expanded into lingerie and named itself Vanity Fair Silk Mills.
Over the decades the company has reshaped its portfolio, adopting the abbreviated name in the 1960s to reflect an increasingly diverse product line-up.
A series of acquisitions in the early 21st century created the modern day group, although VF has not made a sizeable purchase since it added Icebreaker, the merino clothier brand, and Altra, the running shoes brand, in 2018.
Most recently it has focused on disposals. VF spun off its Wrangler and Lee jeans businesses, among other assets, as Kontoor Brands last year, and in January it put its workwear division that sells to businesses up for sale.
Today the company is focused on 12 brands, mostly outdoor and activewear related, including the JanSport and Eastpak backpack divisions and Napapijri, an upmarket label known for its Skidoo jackets.
“We’ll be thoughtful, but there will be opportunities, we know that [for acquisitions],” said Mr Rendle, who has run the group since 2017.
Asked how much firepower VF had to do deals, he said the company had access to $5bn in cash following a recent bond offer and revolver. “We’ll use that as we see fit, with near-term liquidity being the most important thing today.” Acquisitions could include not just clothing brands, but companies that could help expand its capabilities in data and digital.
While coronavirus disruption and closures have hurt the company, whose revenues fell 11 per cent from a year ago to $2.1bn in the three months ended March, strength in ecommerce has helped it hold up better than peers. Digital initiatives include personalisation services that allow customers to design their own footwear, clothing and backpacks based on photos or artwork.
Mr Rendle said he expected interest in outdoor activity to increase as lockdown restrictions are eased. “We’re not going to take flights any time soon, but people do want to get out and recreate near home.”
The group was previously based in North Carolina, where Wrangler was founded, but after the Kontoor spin-off, VF relocated last year to Denver.
Mr Rendle added that he expected the crisis to accelerate VF’s shift away from department stores and other struggling retailers.
VF has about 1,500 stores globally under the Vans, Timberland, The North Face, and other brands, and direct to consumer channels at present account for about 40 per cent of revenues.
In contrast to retailers that have withheld rent in the crisis, the chief executive said that VF was meeting its obligations to landlords and suppliers.
“We know we will be one of the surviving companies,” he said. “Being a preferred partner that treats people the way we want to be treated, we think will put us in a very advantaged position.”