Like other footwear companies, VF Corp. faced major supply chain disruptions this quarter. According to executives, the company’s recently added Supreme brand saw the worst impact across the company’s brand portfolio.
Overall, VF, which also owns Vans, The North Face, Timberland, and Dickies, missed revenue expectations this quarter. The Denver-based retail group reported a revenue growth of 23% to $3.2 billion, missing a $3.5 billion prediction from analysts surveyed by Yahoo Finance.
According to VF chairman, president and CEO Steve Rendle, all VF brands have experienced product delays that have made it difficult to meet demand. Supreme, which is currently being integrated into VF’s larger supply chain network, has seen about 30% less inventory around drops, despite a strong sell-through rate.
“Supreme has had a disproportionate impact to the supply chain disruptions that we’re talking about,” said Rendle. “They’ve got an exposure into Vietnam. And if you think about the model, due to the nature of how they flow products, they don’t carry forward inventory.”
VF Corp. acquired the New York-based streetwear brand, known for its high-heat drops that often sell out online in minutes, last December. Materials shortages, factory closures abroad in China, Malaysia, and Vietnam, labor shortages, and congestion at crucial U.S. ports have made it difficult for Supreme to meet inventory targets for its weekly drops.
“We did see a continued strong interest and a clear opportunity for the brand to continue to grow,” Rendle said. “But I think the supply chain interruptions are helping us all see the further benefit of the supply chain integration that is in place that will help our Supreme team really diversify their footprint and focus in areas where we can help them maintain better flow.”
Moving forward, VF is aiming to have more transparency surrounding inventory and delivery required for Supreme’s weekly drops to help it recover the lost volume of the last few weeks.
“In light of this disruption, the plan that this group operates with, the agility to be able to flex, continues to be a competitive advantage,” Rendle said. “And as they integrate into our supply chain, it will be able to mitigate some of these impacts.”
Despite the loss, VF has big plans for Supreme, which it plans to expand across multiple geographies in an effort to turn it into VF’s fifth $1 billion brand in a few years. For fiscal year 2022, VF expects revenue to reach approximately $12 billion, including about $600 million from the Supreme brand. Analysts remain optimistic as well.
“On Supreme, we believe the brand continues to represent upside for VFC particularly into 2H,” said BTIG analyst Camilo Lyon in a note. “Supreme has a number of high profile collabs in the works set to drop this fall, including with True Religion, The North Face, and Nike.”