Strategy

VF to Drop Denim Brands in Spinoff Move

The decision to spin off Wrangler and Lee into a separate company reflects VF's strategy of focusing on active-lifestyle brands such as The North F...
Matthew HellerAugust 13, 2018
VF to Drop Denim Brands in Spinoff Move

VF Corp. announced Monday it is spinning off its Wrangler and Lee jeans into a separate company to focus on outdoor and active-lifestyle brands such as Vans sneakers and The North Face.

The move ends VF’s 49-year association with Lee, which it acquired in 1969. It added the Wrangler, Rustler, and JanSport brands to its portfolio through its purchase of Blue Bell Holding Co. in 1986.

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“Sales of Wrangler and Lee jeans have slowed in recent years as jeans have fallen out of favor with consumers who instead opt for yoga pants or premium brands like J Brand or Frame,” The Wall Street Journal noted.

In 2017, sales of VF-made jeans fell 3% to $2.66 billion while profit dropped 14% to $422 million. The new standalone company, which also includes VF’s outlet business, will have estimated annual revenue of more than $2.5 billion, VF said.

“In alignment with our strategic plan, the decision to separate these businesses will allow VF to sharpen its focus as a consumer-centric and retail-minded organization anchored in activity-based lifestyle brands,” CEO Steve Rendle said in a news release.

“Our jeans platform is a successful, sustainable business with iconic global brands and a clear path to value creation as a standalone entity,” he added.

VF has in recent years sold denim brand Seven for All Mankind and apparel brand Nautica and divested from its stake in the Majestic brand, the official supplier of Major League Baseball uniforms. Skateboarder favorite Vans has driven much of the company’s recent growth, with profit from activity-based outdoor products climbing 15% last year.

The core company, which will move to Denver from Greensboro, N.C., is expected to have annual revenue of more than $11 billion.

“[Jeans] has been the weak link in the portfolio,” Jane Hali, CEO of investment research firm Jane Hali & Associates, told Reuters. “Now they can concentrate on the outdoor coalition and Vans, a much more unified and strong stable of brands.”

In trading Monday, VF’s shares dropped 3.8% to $92.65.