VF Corp topped analysts’ estimates for second quarter revenue. For the 3-month period, revenue from the Vans business grew by 26 percent, with online sales for the brand increasing by a whopping 55 percent. Net revenue for Greensboro, North Carolina-based VF rose 15 percent to $3.91 billion, beating analysts’ average estimate of $3.87 billion. And a big part of that is sneakers, with Vans being touted as “the next major lifestyle brand,” according to CNBC.
The publicly-traded American apparel and footwear giant, which recently spun off its denim business (namely, Wranger and Lee jeans), revealed this month that thriving sales for Vans’ (and North Face’s) high-margin products helped to boosted its overall bottom line. The question is now: What is boosting the growing demand for Vans, the quintessential skate world (and increasingly, fashion world) footwear brand?
The second quarter revenue report from VF comes just days after Piper Jaffray released its bi-annual “Taking Stock with Teens” report. After surveying more than 8,600 U.S. teens about their spending habits, the investment bank found that Vans – which first eclipsed outwear giant North Face as VF’s top-selling brand in March 2017 and now makes up almost 25 percent of VF’s annual sales – was the fastest-growing brand in terms of finding teens’ favor. Over all, Nike remains in the top spot, but Piper Jaffray noted that “staggering increases came from females where Vans unseated Nike as the No. 1 brand among [upper-income] females.”
Over the past 15 years or so, Vans – which got its start in Southern California in March 1966 when brothers Paul and Jim Van Doren and their business partners Gordon Lee and Serge Delia began making simple-but-thick-soled slip on and lace-up sneakers in-house and selling them directly to a whole slew of skaters and surfers – has been working hard.
Despite widespread success, including ever-growing profits and a $43 million initial public offering in August 1991, as well as partnerships with the likes of the Warped Tour, appearances in cult films (such as Fast Times at Ridgemont High), when VF acquired Vans in 2004 for $396 million, it was widely understood that the company was hardly at the peak of popularity. In fact, it was almost exactly the opposite.
As Esquire’s Jonathan Evans wrote last year, “After riding the wave of the ‘90s skateboarding boom, Vans faced new competition from younger skate shoe brands like DC and Osiris. These companies—born only a few years earlier—favored a chunkier, more tech-forward silhouette (a word the fashion community uses to describe the shape of a shoe). Vans’ retro styling, by comparison, felt stale.”
“By the early years of the new millennium, nearly a decade of sustained growth had fallen off—as had customers’ goodwill,” he wrote.
Yet, the 90’s appeal of its staple styles – paired with “years of work expanding the brand’s appeal beyond teenage skateboarders,” as Fortune’s Phil Wahba wrote in March 2017 – is precisely what catapulted Vans into a modern, multi-billion footwear giant.
In an effort to expand upon its footprint and revenues, while staying true to its skater roots, Vans set out to improve its production and distribution channels, including making its shoes available directly to consumers online. It has also placed enormous focus on “really understanding everything there was to know about our consumers,” according to Vans’ Brand President Kevin Bailey.
The results have been significant and consistent. For instance, Vans saw impressive double-digit growth between 2010 and 2014, and then sales hit $2 billion for the first time ever. It was 2015, and Vans was on track to meet its five-year growth plan, which was announced in 2012 and called for $1 billion in revenue growth, up to $2.2 billion by 2016.
When the time came to assess the result of the plan in 2016, Vans’ sales had not only met the goal, they had surpassed it, reaching $2.3 billion in revenue. As for its gross margins, the money the company makes after subtracting the cost of goods sold, those have grown from 48 percent in the early 2000’s to 60 percent.
In light of these results, Vans has set loftier goals – to reach $5 billion in revenue by 2023 – and it is growing swiftly thanks to its favorable positioning as both nostalgia and streetwear continue to dominate the modern consumer psyche.
More than that, Vans has friends – and fans – in high places. From the feet of Justin Bieber, Kanye West and the Kardashian/Jenners to fashion editorials on Instagram, Vans’ wares are nearly unavoidable in 2018. And then there are the collabs. Earlier this month, for instance, Vans continued its successful partnership with cult streetwear/skatewear brand Supreme, which dropped a limited edition collab with Vans, offering up what Esquire called “a tweaked version of an under-the-radar silhouette dating back to 1995: the Sid Pro.”
Despite the explosion in popularity, the once-stagnant skater brand maintains that it has been able to revamp thanks to a razor-sharp focus on its root. “You’re not going to see us, as long as I’m around, having a basketball shoe or a football cleat. We did in the early ‘80s; we had football, basketball, racquetball, wrestling, skydiving, break-dancing … But we almost went out of business,” Steve Van Doren, Paul’s son and Vans’s Vice President of Events and Promotions, told Esquire. He is referring to Van’s overextension and subsequent Chapter 11 bankruptcy filing in 1984.
“So we had to come back to earth and get back to what we do,” per Van Doren. This has included being realistic about what products make sense for the Vans brand and “being selective about its products’ [distribution].” After all, “Ubiquity is not Vans’ objective,” Doug Palladini, Vans’ Global Brand President, told Fortune.
As of now, Palladini says that Vans maintains just 5 percent of the $39 billion U.S. footwear market and 1 percent of the apparel market, meaning that there is a lot of room for growth, which seems somewhat inevitable given that it is VF’s fastest-growing brand.
In terms of what makes Van’s (multi-billion dollar) return to grace so very impressive, Evans says it is that Vans, “in an age of unprecedented technological innovation, leaned on just five classic styles to drive its cultural relevance.” And that relevance, he argues, “has never been higher.”