VF Corporation (VFC) sells its portfolio of more than 35 brands through other retailers, its wholesale channels, and direct-to-consumer sales (or D2C). D2C includes sales made through company-owned stores and through VFC’s websites. Wholesale channel revenues include sales made to premium and mid-market department stores, specialty stores, chain stores, and mass merchants. These retailers (XRT) may, in turn, sell VFC products through their own websites.
Revenues from wholesale
Wholesale is VFC’s largest selling channel. Wholesale channel sales generated ~$8.8 billion in sales in 2013, or 77.2% of the company’s total revenues. It’s also very relevant as all brands in VFC’s portfolio aren’t available through company-operated stores. Sales are made at lower prices through this channel, and thus margins are lower compared to D2C sales.
Department stores and mass merchandisers such as Wal-Mart (WMT), Target (TGT), Macy’s (M), Sears (SHLD), Nordstrom (JWN), and Kohl’s (KSS) are some of VFC’s biggest customers. WMT, TGT, M, SHLD, JWN, and KSS are part of the SPDR S&P Retail ETF (XRT). WMT, TGT, and KSS are some of XRT’s biggest holdings, comprising 1.01% each of the total portfolio holdings.
The company’s ten largest customers are US-based retailers. They accounted for 21% of total revenues in 2013. VFC’s five largest customers, also US-based retailers, accounted for ~16% of total revenues in 2013. Wal-Mart (WMT), the world’s largest retailer, was the company’s largest customer in 2012, accounting for ~8% of total revenues. Most sales were recorded in the Jeanswear coalition.
Upmarket brands like 7 For All Mankind retail at premium retailers such as Nordstrom (JWN), Harrods, and Bloomingdale’s. VFC also has an exclusive wholesale and licensing arrangement with Kohl’s (KSS) that includes all Rock & Republic apparel and accessories.
Falling but sizable
The percentage contribution of the wholesale channel to the sales mix is, however, in a decline mode. Wholesale channel sales made up ~85% of revenues in 2007. That’s dropped to ~75.5% in the first three quarters of 2014. The company expects this to fall still further in coming years as it experiences higher e-commerce sales and seeks to expand its own store network in a bid to improve margins.
Despite a declining contribution to overall sales, wholesale will still account for about 70% of sales in 2017. Hence, applying an omni-channel strategy, one that combines wholesale, retail, and e-commerce, is essential for VFC.