Drawn by attributes ranging from access to an increasingly affluent market in this region and easy flow of both information and goods, New York Stock Exchange-listed fashion group VF Corp has decided to relocate its global product supply hub in Asia to Singapore from Hong Kong over the next 12 months.
Famed for its apparel and footwear brands, such as Vans, Dickies and The North Face, VF’s new supply hub will house a so-called “hyperdigital” supply chain, with a key hub in Singapore that has better agility and efficiency in managing the flow of products around the world.
“It is important to remember that the Asia hub for VF supplies almost 80% of everything VF sells globally. And so, we are supplying products for all of the VF brands into all of the countries where VF is selling these products,” says Gareth Brooks, managing director of VF Asia Sourcing, in an interview with The Edge Singapore.
“The focus of our operation here in Singapore is going to be on strategic leadership and also strategic functions. Our industry and business are going through a transformation. It is changing from an analogue industry to a digital one,” says Brooks.
“But I think with what’s happening in the world now, both from the consumer viewpoint, but also just generally in terms of how businesses operating, we’re recognising that we need different scales, skills and capabilities inside our business for the next five to 10 years,” says Brooks, adding that Singapore is where the capabilities to address these needs can be found.
All of VF’s products are designed by the brands themselves, be it in the US, Europe or Asia, and then passed over to the product supply team which will closely with the group’s network of suppliers to develop and manufacture the products. Brooks explains that the Singapore team will be responsible for not just the development and manufacturing of the finished goods, but also the sourcing of materials and components.
Singapore talent
The US-China trade war was one of the main reasons many brands have moved their Asian headquarters to the Southeast Asia region. Singapore is well known to be an open economy and highly dependent on international trade. The country’s strategic location at the crossroads of major air and sea routes within the Asia Pacific region and the Indian subcontinent also makes it an attractive site.
However, in VF’s scenario, their move from Hong Kong to Singapore has nothing to do with the still-ongoing US-China trade war. “This move is more about securing the right geographic location for us, while finding and developing the skills and capabilities needed for our supply chain for both now and the coming years,” says Brooks, who adds that the group still has a large presence in China, as its sales and marketing leadership are based out of Shanghai.
Agnes Tan, vice president, human resources, of VF Asia Pacific, explains: “We are looking at tapping the digital capabilities and talent that we have in this market. And the apparel footwear segment is the part where we really need to onboard the new hires and put them through a very structured training curriculum and capability development.”
Tan adds that Covid-19 has been an accelerator for the company’s digitalisation push. The pandemic has caused changes in supply chain, macro developments and consumer preferences, which together help boost the group’s digitalisation efforts.
With its new supply hub in Singapore, VF intends to hire up some 100 people over the next 12 to 15 months. These new hires will be put through a series of proper training. “We bring with us a long legacy and heritage of having deep technical expertise around textile, apparel and footwear industry. We’re going to be launching a VF Academy here to help train and develop local associates, and pass the skills and knowledge to them. And given our size and scale, I hope this helps Singapore to establish itself as a hub for footwear and apparel businesses in the future,” says Brooks.
Sustainable and trendy
As an apparel company, VF needs to be in tune with not just fashion but also the corporate scene. Unsurprisingly, one of these is the greater emphasis on sustainability. “I see evidence of consumers having a stronger consideration around sustainability, and transparency in their purchasing decisions,” notes Brooks, who adds that sustainability has been a part of VF’s DNA for a long time.
VF has a long history of being not just an owner of brands, but also a manufacturer with several factories located in the Western Hemisphere. “We know that by running our own manufacturing facility, the positive impact there is from behaving responsibly — both towards the workers and the quality of the products. We also ensure that our plants are run in a responsible way and in turn have an impact on the communities,” explains Brooks.
It is not just the manufacturing facilities that are ensured to run sustainably. VF also has a dedicated responsible sourcing team to ensure that all raw materials sourced are sustainable.
“We are not just focused on the activities that happen inside the facilities where our product is being developed to manufacturing, but also thinking about the communities at large. We estimate that on any one day, there are about a million people around the world involved in the manufacturing of VF products. So, that’s a big responsibility for us. We focus on our worker community development by partnering with our manufacturers and other organisations to identify what things are going to have a meaningful impact around those communities,” says Brooks.
Sustainability is becoming more important to consumers these days. Brooks says that consumers are not just considering sustainability in their purchases, but also requesting for information on how the product was made.
With that, VF has created a sustainability website that has so far published over 40 source maps that show the journey of all the materials and products from sourcing to manufacturing, to allow consumers to understand and learn how the products are being made.
“I think it is all part of giving consumers confidence in the sustainability metrics and data of the product… And I think that we are going to continue to see that evolve over time. And that is why we are investing and committing resources into building that capability now as an organisation, because we believe it’s going to become increasingly important,” says Brooks.
Strong financials
For its latest 4QFY2021 ended April, VF Corp recorded an overall earnings per share (EPS) of 27 US cents, up 169% y-o-y. Overall revenue was 23% higher y-o-y at US$2.6 billion ($3.4 billion), driven by VF’s largest brands, e-commerce growth and a revenue increase in the Asia Pacific region, which experienced a significant negative impact from the Covid-19 pandemic in the prior year.
On the full-year basis, however, earnings were not as strong, driven by store closures and lower consumer demand as a result of the Covid-19 outbreak and related government actions and regulations. FY2021 earnings came in at US$407.9 million and adjusted EPS was US$1.31, which is 51% lower y-o-y, while revenue decreased by 12% y-o-y to $9.2 billion.
For the FY2021 period, VF declared a quarterly dividend of 49 US cents per share, similar to that paid in the previous quarter. “We are a 120-year-old company that is successful and financially very strong,” says Brooks.
VF Corp is confident on its trajectory towards a recovery from the pandemic. “I could not be more pleased with how our organisation navigated fiscal 2021,” says chairman, president and CEO Steve Rendle in the company’s earnings commentary.
“Early in the year, we took important actions to protect our people and the enterprise, while maintaining investments to drive our transformation and accelerate organic growth. At the same time, we took bold, forward-looking actions to spark additional growth and value creation. As a result, we are exiting this year in a position of strength with broadbased momentum across the portfolio,” he adds.
Looking forward, VF says it will continue to monitor the Covid-19 outbreak globally and comply with guidance from government entities and public health authorities to prioritise the health and well-being of its employees, customers, trade partners and consumers. As uncertainty surrounding the Covid-19 pandemic continues, VF expects ongoing disruption to its business operations.
Despite that, VF is upbeat on its outlook for FY2022. VF expects to record revenue of about US$11.8 billion in FY2022, reflecting growth of approximately 28% from FY2021. VF Corp expects revenue growth across all segments — outdoor, active and work. It is also positive on its international revenue, which is expected to increase by 25%-27% in FY2022.
Photo: Albert Chua/ The Edge Singapore
