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The North Face Is About To Fall Off The Mountain

12/12/2011

VF Corp., whose stable of banners includes Vans and The North Face, announced an aggressive growth, including plans to open 400 U.S. stores across its various brands during the next five years.

In addition to the U.S. expansion, VF is looking to open some 225 stores in Europe and 80 in Asia. The expansion is expected to bring the company’s global store count to 1,500 units.

VF’s goal is to reach $12.7 billion in revenues by 2015. During the next five years, the company expects to generate $3 billion from its outdoor and action sports division, where revenues have grown on average by 17% over the past five years, $1 billion from growth in Jeanswear through the Wrangler and Lee brands, led by expansion in international markets such as Asia, Europe and Latin America and $1 billion from higher revenues across Sportswear, Imagewear and Contemporary Brands.

The North Face has been the key driver of the outdoor and action sports division. I recently asked a couple of Chinese and Taiwanese manufacturers making TNF products like the Denali Jacket what kind of volume they were doing and the responses were staggering. Tens of thousands a month – at multiple factories!

But there’s a dark cloud on horizon for TNF. Those same makers say the other big customer is Under Armour. UA’s numbers are equally impressive. Go to any sporting goods store today, such as Dick’s or Sports Authority, and the dominant brand is UA.

Under Armour’s advantage over The North Face is penetration. UA’s products penetrate multiple sports and every season. As a result UA has potential customers in nearly every demographic – age, activity, income and location. Something TNF does not.

I admire what VF has done with The North Face. VF has succeeded where others have failed with the TNF brand. But I don’t  believe TNF will be able to sustain its current trajectory. When that happens, VF’s outdoor and action division is going to be a disappointment.

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