VF Corp is ditching quintessential denim brands to focus on activewear.

What happened

  • The apparel conglomerate VF Corp announced plans to spin off Lee and Wrangler jeans, which it originally acquired in 1969 and 1986 respectively. In turn, it will create a new company containing all of VF’s jeans businesses—Wrangler, Lee, Rustler, Rock & Republic—and 80 VF outlets (the equivalent of $2.5 billion in annual revenue).

Why it matters

  • Though Lee and Wrangler once were integral to VF Corp, denim doesn’t have the same hold on consumers today, who are more inclined to shop for activewear or premium brands; in 2013, jeans made up $18.8 billion in U.S. sales, only to plummet to $16.2 billion by 2017. Denim brands at VF Corp contributed $2.66 billion in 2017 sales, but this revenue hasn’t grown throughout the past decade. VF Corp also sold Seven for All Mankind in 2016—as well as the apparel brand Nautica earlier this year—in order to focus on activewear and outdoor brands: the higher-performing North Face, JanSport and Eagle Creek.
  • Looking at the landscape of holding companies, which typically aim to acquire more brands, VF Corp stands out for remaining lean, which will likely pan out in the long run. LVMH has now expanded its portfolio to more than 60 brands—some of which, like Marc Jacobs, are falling through the cracks. Meanwhile, Gucci accounted for 57% of income in Kering’s luxury division in 2017, raising questions about an unhealthy dependence, though the company stated in July that moving forward, it will grow its business organically rather than via acquisitions. With this in mind, it’s curious that VF Corp wouldn’t just sell its denim brands—spinning them off is more work for the parent company, especially when there is a strong likelihood of selling in the future.