A new, more streamlined distribution organization in markets with underexploited potential is being put in place by VF Corp.
The activewear giant said Wednesday that it has expanded the scope of its existing agreement with retail conglomerate GMG, kicked off 12 years ago, to further develop its footprint in the Southeast Asia, Middle East and North Africa markets.
Over the next five years VF Corp. and its partner plan to open 300 stores across the three regions for the Vans, The North Face and Timberland brands, upping the current count of 90 flagships it operates, as well as drive e-commerce business for selected brands. As per the deal, GMG will be instrumental in The North Face’s foray in North Africa, where the brand currently has no distribution.
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The deal is aimed at reshaping VF Corp.’s patchworked presence in those regions, relying on a single partner for all retail operations.
“Against the backdrop of global markets moving at different speed it’s important to make choices. This important decision will allow VF Corp. to accelerate and return to growth rapidly and realize an international expansion,” Martino Scabbia Guerrini, VF Corp.’s executive vice president, global chief commercial officer and president of emerging brands, told WWD in an exclusive interview. The executive took on the additional role of chief commercial officer last October, with global oversight of distribution.
“Leveraging a partner to expand investments and speed of execution in these countries is an opportunity, allowing us to focus on fewer things,” Scabbia Guerrini said.
“We can’t ignore facts, these are all areas with an emerging middle class, with lots of young people with a passion for sports, the outdoors and an active and healthy lifestyle,” he said.
“We are looking for a simpler and more focused operational approach. We are thinking in terms of the company’s global commercial prowess leveraging the three main regions – Americas, Europe and Middle East, and Asia – and trying to build stronger synergies in the way these regions and platforms are executed,” Scabbia Guerrini explained.
“I wanted to fix the fragmentation and lack of focus,” he added. “It’s about compacting an important opportunity under a strong partnership with the right intention,” he added.
“When [you are living] a high-pressure moment and you need to reset, it’s the right time to simplify your operational model, making choices that set you stronger across different avenues, and more rapidly, without necessarily handling everything directly,” Scabbia Guerrini said.
The executive believes that the new partnership will leave brands with bandwidth to focus on innovation across products, marketing, store concepts and digital tools, all instrumental in driving growth.
VF Corp. is dealing with a slower-then-expected turnaround for the Vans brand and a slowdown in the Americas, especially the U.S.x
The group’s third-quarter sales fell 16 percent to $3 billion, pressuring the bottom line. Net losses for the quarter tallied $42.5 million, or 11 cents a share, a big drop down from earnings of $507.9 million, or $1.31 a year earlier.
Chief executive officer Bracken Darrell, named to the post in June last year, is hands-on in the effort to rejuvenate Vans, cutting costs, deciding which brands to sell off, rearranging the C-suite, and changing the organizational structure in the Americas.
Scabbia Guerrini touted the brisk consumption dynamics in all regions involved in the partnership, especially the Middle East, citing Dubai as the world’s third most relevant tourist destination. and the rapidly expanding appetite of Saudi Arabia customers for VF Corp.’s hero products.
For his part, Mohammad A. Baker, deputy chairman and chief executive officer of GMG, said in a statement that “an expanding labor force, rising household incomes, and an expanding consumer base” as well as “consumers’ increased focus on their health” with a rising popularity of athleticwear are poised to propel the growing potential of Southeast Asia for VF Corp.’s portfolio.
“Continuing our strategic expansion and adding new markets across Southeast Asia signifies a pivotal chapter in our successful long-standing partnership with VF Corp. Aligned with our shared vision, commitment to exceptional consumer experiences, and the empowerment of active lifestyles, we anticipate continued achievements on this transformative journey together,” Baker said.
The rollout of the partnership over the next five years entails a step-by-step penetration, first in Saudi Arabia, which is growing its tourism and commercial scope, followed by Southeast Asia and North Africa, with a Cairo-to-Casablanca roadmap, Scabbia Guerrini explained.
GMG is a Middle East-based retail, distribution, and manufacturing company with a diversified portfolio of local and international brands in the sports, healthcare, beauty, food, real estate and logistics sectors. It is owned by the Baker family and is active in the Middle East, North Africa and Asia. It also operates specialty concept store Sun & Sand.
