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VF Corporation

VF Corporation

105 Corporate Center Boulevard
Greensboro, North Carolina 27408-3194
U.S.A.
Telephone: (336) 424-6000
Fax: (336) 547-7630
Website:http://www.vfc.com

Public Company
Incorporated: 1899 as Reading Glove and Mitten Manufacturing Company
Employees: 58,000
Sales: $5.08 billion (2002)
Stock Exchanges: New York Pacific
Ticker Symbol: VFC
NAIC: 314911 Textile Bag Mills; 314912 Canvas and Related Product Mills; 315191 Outwear Knitting Mills; 315192 Underwear and Nightwear Knitting Mills; 315223 Mens and Boys Cut and Sew Shirt (Except Work Shirt) Manufacturing; 315224 Mens and Boys Cut and Sew Trouser, Slack, and Jean Manufacturing; 315225 Mens and Boys Cut and Sew Work Clothing Manufacturing; 315228 Mens and Boys Cut and Sew Other Outerwear Manufacturing; 315231 Womens and Girls Cut and Sew Lingerie, Loungewear, and Night-wear Manufacturing; 315232 Womens and Girls Cut and Sew Blouse and Shirt Manufacturing; 315239 Womens and Girls Cut and Sew Other Outerwear Manufacturing; 315234 Womens and Girls Cut and Sew Suit, Coat, Tailored Jacket, and Skirt Manufacturing; 315291 Infants Cut and Sew Apparel Manufacturing; 315999 Other Apparel Accessories and Other Apparel Manufacturing; 448140 Family Clothing Stores

VF Corporation is one of the worlds largest publicly owned fashion apparel manufacturers, designing and producing a diverse array of clothing products for both the U.S. and international markets. The company owns an array of well-known brands in several categories that are sold through a variety of retail sales channels, including department, specialty, mass-merchant, and discount stores. VF is the leading maker of jeans in the United States, holding about one-quarter of the market with such brands as Wrangler, Lee, Rustler, and Riders. Approximately half of the companys revenues come from the sale of jeanswear. Intimate apparel, which includes the Vanity Fair, Lily of France, Vassarette, and Bestform brands, generates about 16 percent of sales. Another 10 percent comes from marketing occupational apparel under the Red Kap, Penn State Textile, and Bulwark brands. VF also sells childrens playwear under the Healthtex and Lee brands, North Face outdoor apparel and equipment, and JanSport and Eastpak daypacks and bookbags. The companys knitwear apparel business designs, manufactures, and markets imprinted sports clothing under licenses from Major League Baseball, the National Basketball Association, the National Football League, the National Hockey League, major universities and colleges, and top NASCAR drivers. Other operations include a chain of about 50 VF retail outlet stores located across the United States, selling a wide range of company products. More than 80 percent of company revenues are derived domestically; the remainder primarily originates in Europe, with South America and Asia contributing small portions of overall sales.

The Early Years

The companys beginnings can be traced to the year 1899, when eight men formed the Reading Glove and Mitten Manufacturing Company in Reading, Pennsylvania, and began producing and selling knitted and silk gloves. Of the founders, two men had previous experience in the garment industry as hosiery manufacturing executives, while a third, John Barbey, was a brewer and banker and controlled the companys financial operations. After 12 years of slow growth, Barbey purchased his partners interests in the company in 1911. The following year, Barbeys son John Edward (known as J.E.) joined the firm as vice-president, and in 1913 the companys name was changed to Schuylkill Silk Mills.

In 1914 the company expanded into the manufacture of silk lingerie, and after three years of successful sales, the Barbeys decided to conduct a contest to find a brand name for their lingerie line. The winner received a $25 prize for the name Vanity Fair. With hopes of establishing a national reputation for the companys merchandise, the Barbeys launched an extensive advertising campaign that emphasized the superior quality and style of Vanity Fair lingerie. This direct-to-the-consumer approach was considered innovative in that time period, because most other lingerie was of mediocre quality and was sold without brand names primarily through jobbers. The Barbeys campaign was successful, and as the Vanity Fair brand name became more well known, the company once again changed its name to Vanity Fair Silk Mills, Inc. in 1919.

By the early 1920s, the rising success of the lingerie product line prompted Vanity Fair to discontinue its glove manufacturing operation and devote itself exclusively to the business of making lingerie. J.E. Barbey was named general manager of the company in 1931 in addition to his position as vice-president. Union organizing activities in the Reading area in the 1930s prompted Vanity Fair to open a new factory in 1937 in Mon-roeville, Alabama, in the union-unfriendly South. J.E. Barbey was known for his antiunion views and did not want to run a unionized factory. The Reading plant remained in operation though not unionized, but after a new wave of organizing actions arose following the end of World War II and two unsuccessful attempts were made to unionize the plant, it was closed for good in 1948.

Innovation and Expansion in the Mid-1900s

Upon his fathers death in 1939, J.E. Barbey assumed the presidency of Vanity Fair, a position that he held for the next quarter century. During that time, he led the company through turbulent times, such as the economic changes that came with World War II. In 1941 the war brought about an embargo on silk, and the company began using rayon in the production of its lingerie. (The silk embargo also led the company to drop the word Silk from the official corporate name in March 1942.) Throughout the rest of the 1940s, Vanity Fair perfected the use of other new types of lingerie fabrics and subsequently introduced products made from a nylon tricot material in 1948.

These innovations changed the face of the lingerie industry. Nylon tricot was soon considered to be an ideal lingerie fabric because of its strength, wearing power, elasticity, and ease-of-care features. Its use also enabled the company to produce lingerie with a variety of fashionable features and in many popular colors. As a result, in 1950 Vanity Fair became the first lingerie manufacturer to receive the Coty Award for Design.

In 1951 Barbey, who owned nearly all of the companys common stock, decided to take the company public. About one-third of Barbeys shares were sold via an initial public offering. The stock traded over the counter until 1966, when a secondary stock offering of shares held by the J.E. Barbey Estate and Trusts was completed (Barbey had died in 1956). The offering represented about a quarter of the outstanding shares and left the Barbey trusts with about a 25 percent stake in Vanity Fair Mills. The offering also enabled the company to gain a listing on the prestigious New York Stock Exchange.

The founders sons death marked the end of Barbey leadership at the company. Harold G. Miller, who had been with Vanity Fair since 1919, was named chairman. Neal Dow and Miller both served brief stints as president before Manford O. Lee began a long tenure in the position in early 1959. Lee, who began with the company in 1942, was named chairman in 1965 following Millers retirement.

Throughout the 1950s and early 1960s, the company achieved steady growth through its production of lingerie and foundation garments. Overseas expansion began in 1958 when Vanity Fair entered into an agreement with the U.K. firm Wolsey Ltd. to make Vanity Fair-style lingerie under the brand Wolsey-Vanity Fair. A similar agreement was reached with an Australian firm the following year. An International Division was created in 1962 to help drive foreign expansion. In 1967, as sales growth for lingerie items was beginning to top off, Vanity Fair attempted to offset the effects by expanding into the robe and loungewear market.

First Acquisitions in 1969; Emergence of VF Corporation

In the late 1960s, Vanity Fair began its evolution into a multibrand clothing powerhouse under the leadership of Manford Lee. The firm completed two major acquisitions in 1969, including the purchase of the H.D. Lee Company, Inc., a manufacturer of mens and boys jeans and casual pants based in Shawnee Mission, Kansas. Also acquired was Reading, Pennsylvania-based Berkshire International Corporation, one of the worlds largest producers of womens hosiery.

Company Perspectives:

VF is the global leader in creating powerful brands of apparel The consumer is the focus of everything we do.

We are the best at bringing people comfort and quality in our brands. We know our consumers, where they are and where theyre headed. We are dedicated to our retail partners. We believe in treating our associates, our colleagues and all those we serve in the course of doing business with the highest levels of honesty, integrity, consideration and respect.

Our world-class people are the source of our success. As a company, we bring excellence in operations and the latest technology to the art of apparel. We bring to market the right products at the right time. Working together, we have a bright future because we create superior products and market them with exceptional skill.

All these things mean success for our associates, our retailers, our shareholders, our communities, and the millions of people who feel good in our brands.

These are the things that make us great. These are the things that make us VF.

H.D. Lee had been established in the midwestern United States in 1889 as a wholesaler called the H.D. Lee Mercantile Company. In the early 1900s, the firm began selling overalls that it obtained from a supplier in the eastern United States. Because deliveries from this supplier were often unreliable, Lee began manufacturing its own overalls, jackets, and dungarees in a factory in Salina, Kansas. It also introduced the Lee Union-All, a garment designed to protect an entire suit or uniform. The Union All became the official doughboy fatigue uniform during World War I. Beginning in the 1920s, Lee launched a series of innovative fabrics and apparel, including heavy-duty denim and Lee Rider cowboy pants. In the 1940s, Lee improved its cowboy pants with a tighter fit and the Tighter Rider brand became the best fitting cowboy pants available. The company established its International Division in 1959, and was rewarded a Presidential E citation in 1964 for making an outstanding contribution to the export expansion program of the United States.

Berkshire International traced its roots back to the early 1900s, when it was founded as Berkshire Knitting Mills, a manufacturer of cotton stockings. The companys production process applied paraffin wax to cotton thread to give the woven stockings the luster of silk. Berkshire developed into the worlds largest manufacturer of womens hosiery, thanks in part to the popularity of motion pictures featuring beautiful actresses in short skirts and stockings, as well as to the outbreak of World War I, which fueled domestic production.

After acquiring the Lee Company and Berkshire International, Vanity Fair changed its name to VF Corporation as a means of reflecting its expansion into these new areas. VF Corporation was designated the parent company of H.D. Lee and Berkshire International, and a new subsidiary was formed under the Vanity Fair name to house the intimate apparel business. Another consequence of the acquisition of Berkshire was that VF gained a large amount of real estate that the latter company had needed because hosiery manufacturing demands a great deal of physical space. In 1970 some of Berkshires unused factory space in Wyomissing, Pennsylvania, three miles west of Reading was converted into the first VF factory outlet store. The second opened in Monroeville, Alabama, ten years later, and over the following two decades about four dozen more would begin operating. Initially the outlets offered only overstocks, factory seconds, and the like, but eventually about half of the merchandise was goods that had been specifically planned for sale through this channel.

Meanwhile, in 1971, VF acquired Kay Windsor, Inc., a manufacturer of budget-priced, ready-to-wear womens dresses and sportswear. This business encountered difficulties during the 1970s because of the growing popularity of womens pantsuits, however, and its division was closed down in 1982.

In 1977 a VF Corporation International Division was established to manage the companys growing operations overseas. The need for this new division had arisen as the export of Vanity Fair intimate apparel to Europe and the Far East soon grew to include many of the products from the Lee Company and Berkshire International. VF reported profits of $28 million on revenues of $470 million that year.

Key Dates:

1899:
Eight men form the Reading Glove and Mitten Manufacturing Company in Reading, Pennsylvania.
1911:
One of the eight, John Barbey, buys out his partners.
1913:
Companys name is changed to Schuylkill Silk Mills.
1914:
Company expands into the manufacture of silk lingerie.
1917:
Through a contest, Vanity Fair is selected as a brand name for the line of lingerie.
1919:
Company changes its name to Vanity Fair Silk Mills, Inc.
1942:
With World War II leading to an embargo on silk, the company drops the word Silk from the corporate name.
1951:
Vanity Fair Mills goes public.
1969:
Hosiery maker Berkshire International Corporation is acquired; Vanity Fair Mills changes its name to VF Corporation; company expands into jeanswear with the purchase of H.D. Lee Company, Inc.
1984:
Bassett-Walker, Inc., producer of fleece activewear, is acquired.
1986:
Purchase of Blue Bell Holding Company, Inc. for $762 million brings the following brands into the fold: Wrangler and Rustler jeanswear, Jantzen and JanSport swimwear and sportswear, and Red Kap occupational apparel
1991:
Childrens wear maker Healthtex, Inc. is acquired.
1997:
Consumerization initiative is launched, along with a corporate restructuring of the firms 17 divisions into five units called coalitions: Jeanswear, Intimate Apparel, Knitwear, Playwear, and International.
1998:
VF acquires Bestform Group Inc. and such intimate apparel brands as Bestform, Exquisite Form, and Lily of France; company headquarters are shifted from Wyomissing, Pennsylvania, to Greensboro, North Carolina.
2000:
VF acquires backpack maker Eastpak; jeans brands Chic, H.I.S., and Gitano; and The North Face, Inc., producer of outerwear and high-tech sporting gear.
2001:
Company launches major restructuring involving the closure of more than 30 U.S. plants, the elimination of more than 13,000 jobs, and the divestiture of the private-label knitwear business and the Jantzen swimwear unit.

An Industry Leader in the 1980s

Although the jeans market was beginning to experience diminished demand, VF entered the 1980s in a more profitable position than either of the two other major jeans makers, Levi Strauss & Co. and Blue Bell, Inc. VFs success was attributed to less dependence on foreign markets; earnings from other areas, such as lingerie; million-dollar investments in capital improvements; and tighter inventory controls. VF also benefited from Levi Strausss decision to expand the distribution of its products to mass-merchandise outlets. Independent retailers that had previously carried the Levis brand angrily responded to this development by stocking the Lee brand instead. Because of the rising demand for Lees products, several of VFs Berkshire International sites were converted to jeans manufacturing facilities, as Lee became VFs largest operating division, accounting for as much as 80 percent of the corporations revenues in the early 1980s.

In 1980 Lawrence R. Pugh joined VF as president and chief operating officer. Pugh had previously worked in a variety of management positions at various companies, most recently as head of Samsonites luggage division. Manford Lee lost a battle with cancer in early 1982, and Pugh became CEO in addition to president. He became chairman of VF the following year. At that time, Robert Gregory was the president of the Lee division, and he joined Pugh in an effort to inject new life into the sluggish jeans market. The two men embarked upon a marketing strategy to set Lee apart from other jeans industry leaders by segmenting production into mens and womens lines. VF became one of the first producers to manufacture stretch jeans for women, as well as dressier, more expensive jeans, which began competing with the designer lines that had become popular. VF developed the Ms. Lee brand, which soon became the best-selling line of womens jeans in the United States.

Meanwhile, VF was also segmenting and upgrading its Vanity Fair lingerie lines with more fashionable items to appeal to younger women. In addition to introducing new products, Pugh increased spending for advertising, expanded the companys retail distribution channels, and increased the size of the VF sales force. The new initiatives helped propel revenues past $1 billion for the first time in 1993.

Continuing to diversify, in 1984 VF acquired Modern Globe, Inc., a manufacturer of mens and womens cotton undergarments since 1917, for $37.4 million. VF also purchased Bassett-Walker, Inc., a producer of fleece activewear based in Martinsville, Virginia, in November 1984 for $293.3 million. Bassett-Walker traced its origins to the founding of the Virginia Underwear Company in 1928 and by 1960 had become one of the largest manufacturers of knitted outerwear in the United States. The addition of these companies to VFs corporate portfolio helped the parent company continue to diversify, which allowed it to avoid reliance upon any one product or market segment.

In 1986 VF became the United States largest apparel manufacturer and domestic jeans supplier when it acquired the Blue Bell Holding Company, Inc., a competitor that was the producer of Wrangler jeans, for $762 million. Blue Bell traced its origins to Hudson Overall Company, which was formed in Greensboro, North Carolina, in 1904. The company was renamed Blue Bell Overall Company in 1919 and merged with its chief competitor, Big Ben Manufacturing, in 1926. Ten years later, Blue Bell merged with another major work clothes manufacturer, Globe Superior Corporation, forming Blue Bell-Globe Manufacturing Company. After acquiring the H.D. Bob Company in 1940 and Casey Jones in 1943, the newly named Blue Bell, Inc. had begun manufacturing garments for the military in World War II. After the war, the company had applied the production methods it used in making military garments to the manufacture of casual clothing and western-style wear. In 1947 the brand name Wrangler was developed for this rapidly growing product line.

VFs friendly purchase of Blue Bell was viewed as an ideal marriage between two companies that had similar manufacturing cultures. The merger offered VF an opportunity to expand more deeply into menswear, while also having available resources to broaden its distribution channels to include mass merchants and discount stores. Furthermore, when VF acquired Blue Bell, it purchased not only the Wrangler product line but also Blue Bells other holdings: the Rustler jeans product line, Jantzen and JanSport swimwear and sportswear, Red Kap occupational apparel, and licenses to the Marithé and François Girbaud upscale sportswear collections. The Rustler brand had been introduced by Blue Bell in 1979 as a basic jean to be sold through mass merchandisers. Red Kap, founded in 1922, had been acquired by Blue Bell in 1964. Blue Bell acquired Jantzen in 1980, 70 years after the swimwear makers founding. Four years later, Jantzen acquired JanSport, maker of backpacks and bookbags.

Although VF had grown considerably in size as a result of its many acquisitions throughout the 1980s, declining jeans sales finally caught up to it in 1989. In the past, whenever one divisions sales had slowed, VF had managed to survive the slump by relying on strong sales in its other divisions. This time, however, the company was paying the price for its decision three years earlier to begin marketing its Lee jeans through mass merchandisers and discount outlets. Just as competitor Levi Strauss had found when it attempted the same thing, the marketing error of moving into the discount realm ended up alienating department store buyers, who began refusing to carry the Lee line because of the lower-quality image it now possessed. Without the aid of department and specialty stores, VF found itself amidst a marketplace already dominated by low-cost importers with widely recognized brand names and large consumer advertising budgets. The Lee division traditionally had not given retail stores significant advertising support and found itself at a sizable disadvantage. As a result, both sales and profits in the jeans area fell significantly.

Compounding the companys problems was the growing popularity of a new line of casual mens apparel called Dockers, which had recently been introduced by Levi Strauss. The Dockers brand cut severely into VFs sales of jeans. VF had not changed its basic Lee Rider style, and had been so involved in rejuvenating its jeans business that it had neglected to notice that other manufacturers had expanded into different trouser lines that took advantage of new apparel trends.

Early 1990s: Rejuvenation, New String of Acquisitions

In the early 1990s, VF not only began taking further measures to rejuvenate its jeans sales but also started focusing on the market segment of women aged 25 to 44. It continued to offer increased marketing for its womens jeans lines, while also emphasizing support for other womens apparel such as the JanSport and Jantzen lines. In 1990 the company purchased the manufacturing operations of intimate apparel brands Vassarette and Form-O-Uth from Munsingwear, Inc. for $11.5 million and added them to the intimate apparel division. The following year marked the $29 million acquisition of Healthtex, Inc. a leading manufacturer of childrens wear.

With a diverse array of products under its corporate umbrella, as well as numerous distribution options, VF instituted a program to strengthen relationships with its retailers and its consumers. First, VF began investing more time and money into researching the buying patterns, needs, and lifestyles of its consumers, so as to better serve them. The company then offered its retailers increased advertising and merchandising support based on the results of its consumer research. The information obtained through market research was also helpful in determining which brands to emphasize at any given point in time. Furthermore, VFs proprietary Market Response System was introduced, providing an electronic link between retailers sales floors and corresponding VF divisions and allowing VF to keep its products in stock at all times.

VF also saw continued growth as a result of its ongoing acquisition program. In 1992 the company purchased three European intimate apparel companies. VF spent $34.6 million for the Valero Group, a Paris-based firm that owned the Variance, Siltex, Bolero, and Silhouette brand names. The Spanish company Vives Vidal, S.A. (Vivesa) and its French affiliate Jean Bellanger Enterprises were bought for $116.3 million, bringing onboard the Intima Cherry, Lou, Carina, and Gemma intimate apparel brands. These additions, combined with the success of newly developed products throughout the year, helped VF break the $3 billion mark in annual sales for the first time in the companys history. With the purchases, VFs international division posted a sales increase of 52 percent for 1992.

Following that record year, Pugh handed down his role as president to Mackey J. McDonald, while still remaining at the companys helm as chairman and CEO. McDonald was a onetime president of the Wrangler division who had worked his way through the ranks since joining VF in 1983. Together, the two led VF through a year of rejuvenated jeans sales, with the exception of the Girbaud division, which began experiencing a decline.

Completed in January 1994 were the acquisitions of Nutmeg Industries, Inc., for $352.2 million, and the H.H. Cutler Company, for $154.7 million, both of which helped VF become a leading supplier of licensed sports apparel. VFs Bassett-Walker division actually benefited from these acquisitions as well, as it became the main supplier of knitwear for the two companies, and therefore increased its output.

The year 1994 was also characterized by cooperative endeavors between different VF divisions and other well-known companies. For example, H.H. Cutler teamed up with Walt Disney Company to create playwear featuring characters from the movie The Lion King, all of which sold out quickly and prompted the creation of similar items the following year featuring Pocahontas. Also, H.H. Cutler and Healthtex combined to introduce a Fisher-Price brand of childrens discount clothing. Jantzen worked with Nike, Inc. to develop a new line of performance swimwear, while Nutmeg readied itself to launch some of its 1995 sports apparel under the Lee Sport name.

Unique projects and ideas such as those above, coupled with VFs conservative financial strategies and high level of brand name recognition by consumers, enabled the company to break the $5 billion mark in annual sales for 1995. At the end of the year, Pugh once again handed down one of his roles at VF to McDonald, who added the responsibilities of being CEO to his list of duties as company president. Pugh, who had overseen the companys growth from two brands to nearly two dozen, remained with the company as its chairman.

Entering the late 1990s, a good majority of VFs products were competing in mature markets, which dictated that the companys future growth was contingent on deriving ways to gain market share. In VFs favor was the evolving trend in many businesses toward dressing more casually at work. But rather than rely solely on such consumer trends and buying patterns, VF began actively formulating new methods to reach consumers and provide them with the best customer service possible, while at the same time increasing name brand recognition. For example, the company began testing a new interactive touch-screen computer program in stores called the Lee Fit-Finder, aimed at helping customers determine the best sizes and styles for their individual body types.

Late 1990s and Beyond: Restructuring and Adding Brands for Future Growth

The historic breaking of the $5 billion sales plateau in 1995 was accompanied by the negative news of a huge decline in net income, which dropped from $274.5 million to $157.3 million. This falloff highlighted the need for cost containment, particularly in an era in which consumers were increasingly seeking quality products at less-than-premium prices. One initiative to contain costs undertaken in the late 1990s was to move more of the manufacturing operations offshore. At the end of 1995, VF announced that it would close nine U.S. plants, laying off 3,800 workers in the process, and open new plants in Mexico and Central America. At the time, the company had about 80 percent of its manufacturing in the United States, and it was aiming to reduce this figure to 65 percent. Around this same time, VF began manufacturing and marketing Lee jeans in China through a joint venture in the province of Guangdong. In December 1997 subsidiary VF do Brasil Ltda. was formed to coordinate manufacturing and marketing activities of the Lee brand in Brazil, the second largest jeanswear market in the world.

One of the first initiatives that McDonald launched after becoming CEO was a program called consumerization, in which the company aimed to reorient all of its operationsincluding manufacturing, marketing, systems technologytoward meeting the needs of customers. VF needed a new organizational structure to support the new strategy because the old divisional arrangement was too complicated. Starting in 1997 the companys 17 domestic and foreign divisions were consolidated into five operating units called coalitions: Jeanswear, Intimate Apparel, Knitwear, Playwear, and International. The restructuring cost about $150 million, and it was aimed at saving a similar amount by eliminating the redundancies of the divisional structure. At the same time, VF said that it would spend an additional $250 million over a four-year period to revamp its product line through a fresh round of advertising, consumer research, and product redesign. The company set a goal of achieving an additional $2 billion in revenue during this period, which would result in overall sales of $7 billion by 2000.

In March 1997, meanwhile, VF signed a letter of intent to acquire Maidenform Worldwide Inc., maker of intimate apparel under the Maidenform, Oscar de la Renta, and Self Expression brands. The acquisition of Maidenform, which had annual revenues of about $400 million, would have represented a major expansion of VFs intimate apparel business, but the deal was called off in April. Later in 1997 VF expanded its jeans portfolio with the purchase of the Brittania brand from Levi Strauss. Brittania was a mass-market brand that VF subsequently repositioned as a fashion-forward, young mens jeans brand. Then in October 1997 the company announced that it would break with its Pennsylvania roots by moving the corporate headquarters from Wyomissing to Greensboro, North Carolina, in order to locate the corporate staff closer to where much of the firms marketing and support units were positioned. The move was completed in June 1998. VFs factory outlet in Wyomissing, the companys largest, stayed put.

VF succeeded in bolstering its intimate apparel lines by acquiring Bestform Group Inc. in February 1998. VF had had only two U.S. intimate apparel brandsVanity Fair and Vas-sarettebut now gained such well-known brands as Bestform, Exquisite Form, Lily of France, Josie, Natori, and Oscar de la Renta (Bestform had purchased the license for the latter from Maidenform in October 1997). The addition of the privately held Bestform, which was founded in 1924 and had annual revenues of about $270 million, would push VFs intimate apparel revenues past the $1 billion mark, making it one of the top three intimate apparel makers in the United States, with about 11 percent market share. There were three other significant developments in 1998: VF divested its license for the Girbaud designer clothing line; Pugh retired in October from his position as chairman, which was assumed by McDonald, who remained president and CEO as well; and VF acquired Penn State Textile Manufacturing, Inc., maker of restaurant apparel as well as table linens and restaurant supplies. Three more work-wear companies were acquired in 1999: Horace Small (public safety and postal apparel), Todd Uniform (custom-designed business uniforms), and Fibrotek (clean-room apparel).

VFs acquisition spree continued in 2000. Eastpak, a maker of backpacks and daypacks, was purchased from Sunbeam Corporation. VF also purchased the Chic and H.I.S. jeans brands from Chic by H.I.S., Inc. and the Gitano jeans brand from Fruit of the Loom, Inc., which was in bankruptcy proceedings. The 2000 purchases were rounded out with the buyout of The North Face, Inc., which was in financial trouble and on the verge of filing for bankruptcy. North Face, which had annual revenues of approximately $240 million, produced outerwear and high-tech sporting gear. All told, VF spent $206.5 million and assumed $107.7 million in debt on these 2000 purchases.

The acquisitions of the late 1990s and 2000 brought about a need for a fine-tuning of the coalition organizational structure. In late 2000 a new Outdoor coalition was created to house North Face, Eastpak, and JanSport brands. An Imagewear coalition combined the companys uniform and knitwear arms. At the same time, VF announced that it was discontinuing the nonapparel operations of the four recently acquired workwear businesses, closing another six higher-cost North American manufacturing operations, and consolidating its distribution centers in North America and Europe. The actions involved 2,700 employees losing their jobs. The company recorded restructuring charges of just under $120 million in association with these moves.

Even with the string of acquisitions, VF fell well short of its $7 billion sales goal for 2000, although revenues that year did reach a record $5.75 billion. Net income for the year fell thanks to the restructuring charge. Profits would fall still further the following year, and revenues would decline as well, as the retail market was hit hard by the economic recession in the United States and as another late-year restructuring was launched. In November 2001 VF announced that it would close down or divest three underperforming businesses: the companys private-label knitwear operation, the Fibrotek workwear unit, and the Jantzen swimwear business; the latter was sold to Perry Ellis International in March 2002 for $25 million. The restructuring also involved the closure of more than 30 U.S. plants and the elimination of more than 13,000 jobs, or 18 percent of the total workforce. When the plant closures were complete, only about 15 percent of the companys merchandise would be made in the United States, as another wave of production was shifted to Mexico, Central America, and the Far East. Restructuring charges for 2001 totaled $236.8 million, as the company aimed to cut its yearly operating costs by $115 million.

Continuing to focus on cost containment in the difficult economic environment of the early 2000s, VF announced in October 2002 that it would close five more U.S. plants and lay off about 3,000 more workers, thereby reducing its U.S. manufacturing to 10 percent of the overall total. The cost-cutting efforts resulted in improved profitability for nearly every VF business in 2002, although all told the firm posted a net loss of $154.5 million as a result of restructuring charges and a $527.3 million charge taken for a change in accounting policy for goodwill. With a low level of long-term debt and nearly $500 million in cash on hand, VF was poised to return to the acquisition arena, with prime targets including makers of jeanswear, intimate apparel, and outdoor apparel as well as lifestyle brands that might encompass several product categories. Having reacted quickly to reign in costs in the highly competitive marketing environment of the early 21st century, and with a history of being extremely adept in reacting to industry occurrences in positive and productive ways, VF Corporation appeared to possess the potential for continued growth and success.

Principal Subsidiaries

Bestform Inc.; Bulwark Protective Apparel, Ltd. (Canada); H.I.S. Sportswear AG (Germany; 97%); JanSport, Inc.; Lee Bell, Inc.; Les Dessous Boutique Diffusion S.A. (France); The H.D. Lee Company, Inc.; The North Face, Inc.; The North Face (Europe) Limited (U.K.); Vanity Fair, Inc.; Vanity Fair Intimates, LP; Vives Vidal Vivesa, S.A. (Spain); VF Chile S.A.; VF Diffusion S.a.r.l. (France); VF de Argentina S.A.; VF do Brasil Ltda. (Brazil); VF Ege Soke Giyim Sanayi ve Ticaret A.S. (Turkey); VF Europe B.V.B.A. (Belgium); VF Factory Outlet, Inc.; VF Germany Textil-Handels GmbH; VF Imagewear (East), Inc.; VF Imagewear (West), Inc.; VF Investments S.a.r.l. (Luxembourg); VF Luxembourg S.a.r.l.; VF Italia, S.r.l. (Italy); VF (J) France, S.A.; VF Jeanswear Limited Partnership; VF Lingerie (France) S.A.; VF Northern Europe Ltd. (U.K.); VF Playwear, Inc.; VF Polska Sp. z.o.o. (Poland); VF Scandinavia A/S (Denmark); VFJ Credit Corp.; Wrangler Apparel Corp.; Wrangler Clothing Corp.

Principal Operating Units

Imagewear Coalition; International Jeanswear Coalition; North & South America Jeanswear Coalition; Playwear Coalition; Global Intimate Apparel Coalition; Outdoor Coalition.

Principal Competitors

Levi Strauss & Co.; Sara Lee Corporation; J.C. Penney Company, Inc.; The Gap, Inc.; The Warnaco Group, Inc.; Fruit of the Loom, Inc.; Russell Corporation; Limited Brands, Inc.

Further Reading

Abend, Jules, VF: View from the Top, Bobbin, December 1994, pp.74 + .

Agins, Teri, Bottom Line: Once-Hot Lee Jeans Lost Their Allure in a Hipper Market, Wall Street Journal, March 7, 1991.

Barrett, Paul M., VF Agrees to Acquire Blue Bell Holdings in a Transaction Valued at $775 Million, Wall Street Journal, July 28, 1986.

Bary, Andrew, Bye-Bye, Blue-Jeans Blues, Barrons, October 4, 1993, pp. 15 + .

Brown, Eryn, VF Corp. Changes Its Underware, Fortune, December 7, 1998, p. 115.

Catanoso, Justin, VF to Relocate to Greensboro, Greensboro (N.C.) News and Record, October 17, 1997, p. Al.

Cunningham, Thomas, VF in Major Restructuring, Daily News Record, November 19, 2001, p. 6.

, VF Looks to Hook Its Biggest Fish Yet, Daily News Record, May 1, 2000, p. 1.

David, Gregory E., VF Corp.: No Respect, Financial World, July 6, 1993, p. 13.

Eklund, Christopher S., and Christine Dugas, Lee + Wrangler + Rustler = A New Blue-Jeans King, Business Week, August 11, 1986.

Eklund, Christopher S., and Sandra D. Atchison., Can VF Find Growth in a Tight Jeans Market?, Business Week, September 16, 1985, pp. 70 + .

Erhinger, Gavin, Its All in the Jeans: Wranglers History Guides Its Future, Western and English Today, May/June 2002, pp. 18-23, 77.

Gordon, Mitchell, Jeans and Things: VF Corp. Has Fashioned a Stylish Growth Record, Barrons, August 17, 1981, pp. 34 + .

, Zipping to Profits: VF Corp. Gains As Jeans Market Fades, Barrons, January 24, 1983, pp. 42 + .

Heisler, Eric, VF Corp. to Close Five Plants, Greensboro (NC.) News and Record, October 18, 2002, p. B8.

, VF to Slash 13,000 Jobs: Restructuring Calls for Closing More Than 30 Plants, Greensboro (N.C.) News and Record, November 15, 2001, p. Al.

Henricks, Mark, VF Seeks Global Brand Dominance, Apparel Industry Magazine, August 1994, pp 20 + .

Jaffe, Thomas, Try This On for Size, Forbes, August 30, 1982, p. 166.

Koenig, Richard, VF Corp. Hopes Planned Acquisition Will Protect It from Jeans Doldrums, Wall Street Journal, October 3, 1984.

Lappen, Alyssa A., Jeans Giant, Forbes, October 3, 1988, p. 8.

Malone, Scott, VF Extends Its Mass Appeal, Womens Wear Daily, June 22, 2000, p. 12.

McCarthy, Joseph L., Man of the Cloth, Chief Executive, June 1996, p. 20.

Monget, Karyn, Keeping VF on Track, Womens Wear Daily, August 24, 1994, pp. 8 + .

, VF Set to Buy Bestform, Womens Wear Daily, November 26, 1997, p. 2.

, Wisemans Global Plan for VF, Womens Wear Daily, April 15, 2002.

Ozzard, Janet, Mackey McDonald: Positioning VF for the Next Century, Daily News Record, April 25, 1996, p. 5.

, VFs McDonald Plans to Continue Strategies Set by Pugh,Daily News Record, August 29, 1995, p. 4.

Pena, Susan L., VF Refocuses Vision in Response to Increased Global Competition, Eastern Pennsylvania Business Journal, January 15, 1996, p. 1.

People, Product, Pride ... The History and Heritage of VF Corporation and Its Divisions, Wyomissing, Penn.: VF Corporation, 1991.

Picard, Diane E., VF Launches Plan to Add $2 Billion in Sales by 2000, Daily News Record, February 12, 1997.

Rodengen, Jeffrey L., The Legend of VF Corporation, Fort Lauderdale, Fla.: Write Stuff Enterprises, 1998, 191 p.

Slutsker, Gary, Simple Is As Smart Does, Forbes, March 10, 1986, pp. 88 +.

Stankevich, Debby Garbato, VF: Life with the Boys, Discount Merchandiser, November 1997, p. 86.

Walzer, Emily, Pack It Up: Eastpak Acquired by VF/JanSport, Sporting Goods Business, April 14, 2000, p. 22.

Sandy Schusteff

updates: Laura E. Whiteley, David E. Salamie

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VF Corporation

VF Corporation

1047 North Park Road
Wyomissing, Pennsylvania 19610
U.S.A.
(610) 378-1151
Fax: (610) 375-9371

Public Company
Incorporated:
1899 as Reading Glove & Mitten
Manufacturing Co.
Employees: 64,000
Sales: $5.06 billion (1995)
Stock Exchanges: New York
SICs: 2325 Mens and Boys Trousers and Slacks; 2339 Womens and Misses Outerwear, Not Elsewhere Classified; 2329 Mens and Boys Clothing, Not Elsewhere Classified; 2326 Mens and Boys Work Clothing; 2331 Womens and Misses Blouses and Shirts; 2322 Mens and Boys Underwear and Nightwear; 2340 Womens and Childrens Undergarments

VF Corporation is one of the worlds largest publicly owned fashion apparel manufacturers, designing and producing a diverse array of clothing products for both the U. S. and international markets. The company consists of numerous divisions, each of which is responsible for a different set of product lines, including jeans, sportswear, intimate apparel, and occupational clothing. Lee Apparel, the firms largest division, along with Wrangler and Marithe & Francois Girbaud, manufacture denim and other casual apparel for adults and children. B as sett-Walker specializes in activewear, such as sweatshirts, jogging suits, and jackets, while JanSport, Jantzen, Nutmeg, and H. H. Cutler manufacture the companys different sportswear lines. Vanity Fair produces lingerie and loungewear items for women, and Healthtex is a leading producer of childrens wear. The Red Kap division markets a wide variety of occupational apparel for industrial use.

The Early Years

The companys beginnings can be traced to the year 1899, when six men formed the Reading Glove and Mitten Manufacturing Company in Reading, Pennsylvania, and began producing and selling knitted and silk gloves. Of the founders, two men had previous experience in the garment industry as hosiery manufacturing executives, while a third, John Barbey, was a banker and controlled the companys financial operations. After 12 years of slow growth, John Barbey purchased his partners interests in the company in 1911 and changed its name to Schuylkill Silk Mills. The following year, Barbeys son joined the firm as general manager.

In 1914 the company expanded into the manufacture of silk lingerie, and after three years of successful sales, the Barbeys decided to conduct a contest to find a brand name for their lingerie line. The winner received a $25 prize for the name Vanity Fair. With hopes of establishing a national reputation for the companys merchandise, the Barbeys launched an extensive advertising campaign that emphasized the superior quality and style of Vanity Fair lingerie. This direct-to-the-consumer approach was considered innovative in that time period, because most other lingerie was of mediocre quality and was sold without brand names primarily through jobbers. The Barbeys campaign was successful, and as the Vanity Fair brand name became more well known, the company once again changed its name to Vanity Fair Silk Mills, Inc. in 1919.

By the early 1920s, the rising success of the lingerie product line prompted Vanity Fair to discontinue its glove manufacturing operation and devote itself exclusively to the business of making lingerie. In 1937 it moved its manufacturing operation from Reading to Monroeville, Alabama.

Innovation and Expansion in the Mid-1960s

Upon his fathers death in 1939, J. E. Barbey assumed the presidency of Vanity Fair, a position which he held for the next quarter century. During that time, he led the company through turbulent times, such as the economic changes that came with World War II. In 1941, the war brought about an embargo on silk, and the company began using rayon in the production of its lingerie. Throughout the rest of the 1940s, Vanity Fair perfected the use of other new types of lingerie fabrics, and subsequently introduced products made from a nylon tricot material in 1948.

These innovations changed the face of the lingerie industry. Nylon tricot was soon considered to be an ideal lingerie fabric due to its strength, wearing power, elasticity, and ease-of-care features. Its use also enabled the company to produce lingerie with a variety of fashionable features and in many popular colors. As a result, in 1950 Vanity Fair became the first lingerie manufacturer to receive the Coty Award for Design. Throughout the next decade, the company achieved steady growth through its production of lingerie and foundation garments. Then in 1969, as sales growth for these items was beginning to top off, Vanity Fair attempted to offset the effects by expanding into the robe and loungewear market.

Vanity Fair made two major acquisitions in 1969, including the purchase of the H. D. Lee Company, Inc., a manufacturer of mens and boys jeans and casual pants. Also acquired at that time was Berkshire International, one of the worlds largest producers of womens hosiery.

H. D. Lee had been established in the midwestern United States in 1860 as a wholesaler called the H. D. Lee Mercantile Company. In the early 1900s, the firm began selling overalls that it obtained from a supplier in the eastern United States. Because deliveries from this supplier were often unreliable, Lee began manufacturing its own overalls, jackets, and dungarees in a factory in Salina, Kansas. It also introduced the Lee Union-All, a garment designed to protect an entire suit or uniform. The Union-All became the official doughboy fatigue uniform during World War I. Beginning in the 1920s, Lee launched a series of innovative fabrics and apparel, including heavy-duty denim and Lee Rider cowboy pants. In the 1940s, Lee improved its cowboy pants with a tighter fit and the Tighter Rider brand became the best fitting cowboy pants available. The company established its International Division in 1959, and was rewarded a Presidential E citation in 1964 for making an outstanding contribution to the export expansion program of the United States.

Berkshire International also traced its roots back to the early 1900s, when it was founded as Berkshire Knitting Mills, a manufacturer of cotton stockings. The companys production process applied paraffin wax to cotton thread to give the woven stockings the luster of silk. Berkshire developed into the worlds largest manufacturer of womens hosiery, thanks in part to the popularity of motion pictures featuring beautiful actresses in short skirts and stockings, as well as to the outbreak of World War I, which fueled domestic production.

After acquiring the Lee Company and Berkshire International, Vanity Fair changed its name to VF Corporation as a means of reflecting its expansion into these new areas. VF Corporation was designated the parent company of H. D. Lee and Berkshire International, and a new subsidiary was formed under the Vanity Fair name to house the intimate apparel business. In 1971, VF acquired Kay Windsor, Inc., a manufacturer of budget-priced, ready-to-wear womens dresses and sportswear. This business encountered difficulties during the 1970s due to the growing popularity of womens pantsuits, however, and its division was discontinued in 1982.

In 1979, VF established an International Division to manage its growing operations overseas. The need for this new division had arisen as the export of Vanity Fair intimate apparel to Europe and the Far East soon grew to include many of the products from the Lee Company and Berkshire International.

An Industry Leader in the 1980s

Although the jeans market was beginning to experience diminished demand, VF entered the 1980s in a more profitable position than either of the two other major jeans makers, Levi Strauss or Blue Bell, Inc. VFs success was attributed to less dependence on foreign markets; earnings from other areas, such as lingerie; million-dollar investments in capital improvements; and tighter inventory controls. VF also benefited from Levi Strausss decision to expand the distribution of its products to mass-merchandise outlets. Independent retailers that had previously carried the Levis brand angrily responded to this development by stocking the Lee brand instead. Due to the rising demand for Lees products, several of VFs Berkshire International sites were converted to jeans manufacturing facilities, as Lee became VFs largest operating division.

In 1982, Lawrence Pugh joined VF as president and chief executive officer, and became its chairman the following year. At that time, Robert Gregory was the president of the Lee division, and joined Pugh in an effort to inject new life into the sluggish jeans market. The two men embarked upon a marketing strategy to set Lee apart from other jeans industry leaders by segmenting production into mens and womens lines. VF became one of the first producers to manufacture stretch jeans for women, as well as dressier, more expensive jeans, which began competing with the designer lines that had become popular. VF developed the Ms. Lee brand, which soon became the best-selling line of womens jeans in the United States.

Meanwhile, VF was also segmenting and upgrading its Vanity Fair lingerie lines with more fashionable items to appeal to younger women. In addition to introducing new products, Pugh increased spending for advertising, expanded the companys retail distribution channels, and increased the size of the VF sales force.

Company Perspectives:

Our mission is to provide above average shareholder returns by being the most responsive apparel company in the world. With leading brands, unparalleled customer service, global strength and a shared management vision, we are well on our way to achieving this goal.

Continuing to diversify, in 1984 VF acquired Modern Globe, Inc., a manufacturer of mens and womens cotton undergarments since 1917. VF also purchased Troutman Industries, Inc., a manufacturer of mens casual slacks, and Bassett-Walker, Inc., a producer of fleece activewear. Bassett-Walker had been founded in 1936, and by 1960 had become one of the largest manufacturers of knitted outerwear in the United States. The addition of these companies to VFs corporate portfolio helped the parent company continue to diversify, which allowed it to avoid reliance upon any one product or market segment.

In 1986, VF became the United States largest apparel manufacturer and domestic jeans supplier when it acquired the Blue Bell Holding Company, a competitor that was the producer of Wrangler jeans. Blue Bell was also a major manufacturer of work clothes, and after acquiring the H. D. Bob Company in 1940 and Casey Jones in 1943, Blue Bell had begun manufacturing garments for the military in World War II. After the war, the company had applied the production methods it used in making military garments to the manufacture of casual clothing and western-style wear. In 1947, the brand name Wrangler was developed for this rapidly growing product line.

VFs friendly purchase of Blue Bell was viewed as an ideal marriage between two companies that had similar manufacturing cultures. The merger offered VF an opportunity to expand more deeply into menswear, while also having available resources to broaden its distribution channels to include mass merchants and discount stores. Furthermore, when VF acquired Blue Bell, it purchased not only the Wrangler product line, but also Blue Bells other holdings: the Rustler jeans product line, Jantzen and JanSport swimwear and sportswear, Red Kap occupational apparel, and licenses to the Marithe and Francois Girbaud upscale sportswear collections.

Although VF had grown considerably in size due to its many acquisitions throughout the 1980s, declining jeans sales finally caught up to it in 1989. In the past, whenever one divisions sales had slowed, VF had managed to survive the slump by relying on strong sales in its other divisions. This time, however, the company was paying the price for its decision three years earlier to begin marketing its Lee jeans through mass merchandisers and discount outlets. Just as competitor Levi Strauss had found when it attempted the same thing, the marketing error of moving into the discount realm ended up alienating department store buyers, who began refusing to carry the Lee line due to the lower-quality image it now possessed. Without the aid of department and specialty stores, VF found itself amidst a marketplace already dominated by low-cost importers with widely recognized brand names and large consumer advertising budgets. The Lee division traditionally had not given retail stores significant advertising support and found itself at a sizable disadvantage. As a result, both sales and profits in the jeans area fell significantly.

Compounding the companys problems was the growing popularity of a new line of casual mens apparel called Dockers, which had recently been introduced by Levi Strauss. The Dockers brand cut severely into VFs sales of jeans. VF had not changed its basic Lee Rider style, and had been so involved in rejuvenating its jeans business that it had neglected to notice that other manufacturers had expanded into different trouser lines that took advantage of new apparel trends.

The 1990s and Beyond

In the early 1990s, VF not only began taking further measures to rejuvenate its jeans sales, but also started focusing on the market segment of women aged 25 to 44. It continued to offer increased marketing for its womens jeans lines, while also emphasizing support for other womens apparel such as the JanSport and Jantzen lines. In 1990, the company purchased the manufacturing operations of intimate apparel brands Vassarette and Form-O-Uth from Munsingwear, and added them to the intimate apparel division. The following year marked the acquisition of Healthtex, Inc. a leading manufacturer of childrens wear.

With a diverse array of products under its corporate umbrella, as well as numerous distribution options, VF instituted a program to strengthen relationships with its retailers and better understand the needs of its consumers. First, VF began investing more time and money into researching the buying patterns, needs, and lifestyles of its consumers, so as to better serve them. The company then offered its retailers increased advertising and merchandising support based on the results of its consumer research. The information obtained through market research was also helpful in determining which brands to emphasize at any given point in time. Furthermore, VFs proprietary Market Response System was introduced, providing an electronic link between retailers sales floors and corresponding VF divisions and allowing VF to keep its products in stock at all times.

VF also saw continued growth as a result of its ongoing acquisition program. In 1992, the company purchased three European intimate apparel companies: Valero, Vivesa and Jean Bellanger Enterprises, which together added eight new international brand names to the VF portfolio. These additions, combined with the success of newly developed products throughout the year, helped VF break the $3 billion mark in annual sales for the first time in the companys history.

Following that record year, Lawrence Pugh handed down his role as president to M. J. McDonald, while still remaining at the companys helm as chairman and chief executive. Together, the two led VF through a year of rejuvenated jeans sales, with the exception of the Girbaud division, which began experiencing a decline. Also engineered in 1993 were the acquisitions of Nutmeg Industries, Inc. and the H. H. Cutler Company, both of which helped VF become a leading supplier of licensed sports apparel. VFs Bassett-Walker division actually benefited from these acquisitions as well, as it became the main supplier of knitwear for the two companies, and therefore increased its output for the year.

1994 was a year characterized by cooperative endeavors between different VF divisions and other well-known companies. For example, H. H. Cutler teamed up with Disney to create play wear featuring characters from the movie The Lion King, all of which sold out quickly and prompted the creation of similar items the following year featuring Pocahontas. Also, H. H. Cutler and Healthtex combined to introduce a Fisher-Price brand of childrens discount clothing. Jantzen worked with Nike, Inc. to develop a new line of performance swimwear, while Nutmeg readied itself to launch some of its 1995 sports apparel under the Lee Sport name.

Unique projects and ideas such as those above, coupled with VFs conservative financial strategies and high level of brand name recognition by consumers, enabled the company to break the $5 billion mark in annual sales for 1995. At the end of the year, Pugh once again handed down one of his roles at VF to M. J. McDonald, who added the responsibilities of being chief executive officer to his list of duties as company president. Pugh remained with the company as its chairman.

Entering the late 1990s, a good majority of VFs products were competing in mature markets, which dictated that the companys future growth was contingent on deriving ways to gain market share. In VFs favor was the evolving trend in many businesses toward dressing more casually at work. But rather than rely solely on such consumer trends and buying patterns, VF began actively formulating new methods to reach consumers and provide them with the best customer service possible, while at the same time increasing name brand recognition. For example, the company began testing a new interactive touch-screen computer program in stores called the Lee Fit-Finder, aimed at helping customers determine the best sizes and styles for their individual body types.

The company continued focusing on a combination of new product development, cost reduction, and inventory management measures to further strengthen relationships with retailers and enable the firm to respond more effectively to market needs. VFs goal had long been to provide the right styles and quantities of products at the right prices on the retail shelf at all times. The ability to meet this goal will be a key determinant in the success of VFs future activities, as it strives to maintain its leadership position, build market share, and increase shareholder value. With products available in almost every type of distribution channel, and with a history of being extremely adept in reacting to industry occurrences in positive and productive manners, VF Corporation entered the end of the century with potential for continued growth and success.

Principal Divisions

Bassett-Walker; H. H. Cutler; Marithe & Francois Girbaud N. A.; Healthtex; JanSport; Jantzen; Lee Apparel; Nutmeg; Red Kap; Vanity Fair; Wrangler; VF Intimate ApparelEurope; VF Jeans wearEurope; VF Asia/Pacific.

Further Reading

Agins, Teri, Bottom Line: Once-Hot Lee Jeans Lost Their Allure In a Hipper Market, The Wall Street Journal, March 7, 1991.

Eklund, Christopher S., and Christine Dugas, Lee + Wrangler + Rustler = A New Blue-Jeans King, Business Week, August 11, 1986.

Ozzard, Janet, Mackey McDonald: Positioning VF for the Next Century, Daily News Record, April 25, 1996, p. 5.

People, Product, PrideThe History and Heritage of VF Corporation and Its Divisions, Wyomissing, Penn.: VF Corporation, 1991.

Sandy Schusteff

updated by Laura E. Whiteley

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VF Corporation

VF Corporation

1047 North Park Road
Wyomissing, Pennsylvania 19610
U.S.A.
(215) 378-1151
Fax: (215) 375-9371

Public Company
Incorporated: 1899 as Reading Glove & Mitten Manufacturing Company
Employees: 45,100
Sales: $2.61 billion
Stock Exchanges: New York Pacific

VF Corporation, one of the worlds largest publicly owned fashion apparel manufacturers, designs and produces jeans, sportswear, intimate apparel, and occupational clothing for both the U.S. and international markets. The company consists of several operating units, each of which is responsible for a different set of product lines. The Lee Company, the firms largest unit, and Blue Bell, Inc. manufacture denim and other casual apparel for adults and children under the Lee, Wrangler, and Rustler brand names. Bassett-Walker Inc. specializes in activewear, such as sweatshirts, jogging suits, and jackets. Jantzen Inc. manufactures the companys line of swimwear and related sportswear, while the Red Kap division markets a variety of apparel for industrial use. Vanity Fair Mills, Inc., produces lingerie and loungewear items under the Vanity Fair brand name.

The company was formed in 1899 in Reading, Pennsylvania, by a group of six men, including two hosiery manufacturing executives and a banker, John Barbey. They selected the name Reading Glove & Mitten Manufacturing Company for their new venture, and began producing gloves of both knitted materials and silk.

After more than ten years of slow growth, John Barbey purchased the interests of his partners in the company in 1911 and changed its name to Schuylkill Silk Mills. His son, J. E. Barbey, joined the firm as its general manager the following year. In 1914 the company expanded into the manufacture of silk lingerie. After three years of successful sales, the Barbeys decided to conduct a contest to determine the brand name for the lingerie line. The winner received a $25 prize for the name Vanity Fair.

To establish a national reputation for the companys merchandise, the Barbeys launched an extensive advertising campaign that emphasized the superior quality and style of Vanity Fair lingerie. This direct-to-the consumer approach was considered innovative for its time since most lingerie was of mediocre quality and was sold without brand names primarily through jobbers.

The company changed its name in 1919 to Vanity Fair Silk Mills, Inc. By the early 1920s and driven by the continuing success of its lingerie product line, Vanity Fair discontinued its glove manufacturing operation to devote itself exclusively to the lingerie business. In 1937 it moved its manufacturing operation from Reading to Monroeville, Alabama.

J. E. Barbey assumed the presidency of the company upon his fathers death in 1939, and held that position until he died in 1956. In 1941 the company began using rayon in its lingerie manufacturing process because of an embargo on silk during World War II. Throughout the rest of the 1940s, Vanity Fair perfected the use of other new types of lingerie fabrics and subsequently introduced products made from a nylon tricot material in 1948.

This innovation changed the course of the lingerie industry. Nylon tricot was considered to be an ideal lingerie fabric due to its strength, wearing power, elasticity, and easy-care features. It also enabled the company to produce lingerie with a variety of fashionable features and in popular colors. As a result, Vanity Fair became the first lingerie manufacturer to receive the Coty Award for Design, in 1950.

Vanity Fair achieved steady growth through its production of lingerie and foundation garments throughout the next decade. In 1969 it expanded into the robe and loungewear market, a move that helped offset softness in lingerie sales during this period.

Vanity Fair made several acquisitions in 1969, including H. D. Lee, a manufacturer of mens and boys jeans and casual pants, and Berkshire International, a hosiery manufacturer. H. D. Lee was established in the midwestern United States in 1860 as H. D. Lee Mercantile Company, a wholesaler. In the early 1900s, the firm began selling overalls, which it obtained from an eastern U.S. supplier. Because deliveries were often unreliable, Lee began manufacturing its own overalls, jackets, and dungarees in a factory in Salina, Kansas. It also introduced the Lee Union-All, a garment designed to protect an entire suit or uniform. The Union-All became the official doughboy fatigue uniform during World War I.

Beginning in the 1920s, Lee launched a series of innovative fabrics and apparel, including heavy-duty denim and Lee Rider cowboy pants. In the 1940s, Lee improved its cowboy pants with a tighter fit and the Tighter Rider brand became the best fitting cowboy pants available.

In 1943 Lee Mercantile changed its name to the H. D. Lee Company, Inc. It established its International Division in 1959 and was rewarded a Presidential E citation in 1964 for making an outstanding contribution to the export expansion program of the United States.

Founded as Berkshire Knitting Mills, Berkshire International traced its roots back to the early 1900s when it was a manufacturer of cotton stockings. The companys production process applied paraffin wax to the cotton thread to give the woven stockings the luster of silk. Berkshire developed into the worlds largest manufacturer of womens hosiery, thanks to the popularity of motion pictures featuring beautiful actresses in short skirts and stockings, as well as the outbreak of World War I, which fueled domestic production.

To reflect its expansion into these new areas, the name of the parent company was changed from Vanity Fair to VF Corporation in 1969. A new subsidiary was formed under the Vanity Fair name for the intimate apparel business. In 1971 VF acquired Kay Windsor, Inc., a manufacturer of budget-priced, ready-to-wear womens dresses and sportswear. This business encountered difficulties during the 1970s due to the growing popularity of womens pantsuits and was discontinued in 1982.

In 1979 VF established an International Division to manage its growing operations overseas. This area had grown from the initial export of Vanity Fair intimate apparel to Europe and the Far East to include several manufacturing and sales facilities acquired from Berkshire International and Lee Company. At the same time, several of the companys other Berkshire operations were sold or converted to jeans manufacturing facilities. This process continued throughout the rest of the 1970s and over the next two decades.

VF entered the 1980s as a more profitable producer than either of the other two major jeans makers, Levi Strauss and Blue Bell, Inc., in a jeans market experiencing diminished demand. This growth was attributed to less dependence on foreign markets; earnings from other areas, such as lingerie; million-dollar-investments in capital improvements; and tighter inventory controls. The company also benefited from Levi Strausss decision to expand the distribution of its products to mass-merchandise outlets. Independent retailers that had previously carried the Levis brand angrily responded to this development by stocking the Lee brand instead.

In 1982 Lawrence Pugh joined the company as president and became chairman the following year. Robert Gregory, the president of the Lee division, succeeded Pugh as president of the corporation. In an effort to inject new life into the sluggish jeans market, Pugh and Gregory embarked upon a marketing strategy to set Lee apart from other jeans industry leaders by segmenting production into mens and womens lines. VF became one of the first producers to manufacture stretch jeans for women and dressier, more expensive jeans, competing with the designer lines that had become popular. It developed the Ms. Lee brand, which became the best-selling line of womens jeans in the United States. The company also segmented and upgraded its Vanity Fair lingerie lines with more fashionable items to appeal to younger women. In addition to introducing new products, Pugh increased spending for advertising, expanded the companys retail distribution channels, and increased the size of the VF sales force.

In 1984 continuing to diversify, VF acquired Modern Globe, Inc., a manufacturer of mens and womens cotton undergarments. Modern Globe dated back to 1917. VF also purchased Troutman Industries, Inc., a manufacturer of mens casual slacks that was subsequently closed in 1986, and Bassett-Walker, Inc., a producer of fleece activewear.

Bassett-Walker was started in 1936 as the Bassett Knitting Corporation. In 1941, after a reorganization, the company was named Bassett-Walker Knitting Company. Led first by S. S. (Sam) Walker and then by his son, Dudley Walker, after Sams death in 1960, the firm became one of the largest manufacturers of knitted outerwear in the United States. It assumed the name Bassett-Walker, Inc. in 1980.

In 1986 VF became the United Statess largest apparel manufacturer and domestic jeans supplier through its acquisition of Blue Bell Holding Company, maker of Wrangler jeans. Blue Bell was founded under the name of the Jellico Clothing Manufacturing Company in 1916. Three years later, after a move from Jellico, Tennessee, to a larger plant in Middlesboro, Kentucky, the firm changed its name to the Big Ben Manufacturing Company. It merged with the Blue Bell Overall Company of Greensboro, North Carolina, in 1926 and operated under this name until 1936 when it became the Blue Bell-Globe Manufacturing Company to reflect its subsequent merger with the Globe Superior Corporation. In 1943 the name was shortened to Blue Bell, Inc.

Blue Bell was a major manufacturer of work clothes, and after acquiring H.D. Bob Company in 1940 and Casey Jones in 1943, Blue Bell began manufacturing garments needed by the military in World War II. After the war, the company applied production methods used in making military garments to the manufacture of casual clothing and western-style wear. In 1947, the brand name Wrangler was developed for this rapidly growing product line.

VFs friendly purchase of Blue Bell was viewed as an ideal marriage between two companies with similar manufacturing cultures. It offered VF an opportunity to expand more deeply into menswear and to broaden its distribution capabilities beyond existing specialty and department store channels into mass merchants and discounters. This acquisition followed an unfriendly takeover attempt of Blue Bell by buyout specialist Carl Icahn. Blue Bell averted that takeover through a leveraged buyout that took the company private. When VF acquired Blue Bell, it purchased not only the Wrangler product line, but also the Rustler jeans product line, Jantzen and JanSport swimwear and sportswear, Red Kap occupational apparel, and licenses to the Maritile and François Girbaud upscale sportswear collections.

Jantzen Inc. was established in 1910 as the Portland Knitting Company, a combination retail store and knitting operation. The company originally manufactured heavy sweaters, woolen hosiery, and other knit goods. In 1913, the firm began producing rib-stitched, wool swimsuits. Renamed Jantzen Knitting Mills in 1918, the company successfully sold swimwear during the 1920s in both the United States and overseas. With swimwear as its primary product, Jantzen broadened its product line to include sweaters, foundations, and casual sportswear. Jantzen became part of Blue Bell in 1980.

Red Kap was formed in 1923 as a wholesaler of bib overalls. During its first ten years of operation, the company expanded into the production of chambray shirts and industrial work pants. During the 1960s, the firm added coveralls to its product line. It became a division of Blue Bell, Inc. in 1964. During the 1970s, Red Kap added a line of career apparel under the Wrangler Uniforms label. This was followed by the introduction of the Big Ben brand of retail work clothes in the early 1980s.

By 1989 declining jeans sales finally caught up to VF. In the past, whenever one divisions sales had slowed, VF had managed to survive the slump by relying on strong sales in its other divisions. This time, however, the company paid the price for an error in marketing strategy it had made three years earlier. At that time, management had decided to sell its main brand of Lee jeans to mass merchandisers, in addition to its department and specialty store customers, to boost sales volume. This decision alienated department store buyers who had been selling the same line at higher prices. They refused to carry the Lee line due to the lower-quality image it now possessed. This strategy also threw VF into a marketplace already dominated by low-cost importers with widely recognized brand names and large consumer advertising budgets. The Lee division traditionally had not given retail stores significant advertising support and found itself at a sizable disadvantage. As a result, both sales and profits in the jeans area fell significantly.

Compounding the companys problems was the growing popularity of a new line of casual mens apparel called Dockers, which had recently been introduced by competitor Levi Strauss. The Dockers brand cut severely into VFs sales of jeans. VF had not changed its basic Lee Rider style and had been so involved in rejuvenating its jeans business that it had neglected to notice that other jeans manufacturers had expanded into different trouser lines that took advantage of new apparel trends.

In 1990 VF purchased the Vassarette brand and Form-O-Uth manufacturing operations for intimate apparel from Mun-singwear. This was followed, one year later, by the acquisition of Health-tex Inc. a leading manufacturer of childrens wear. Health-tex had been formed in 1921 as the Standard Romper Company, Inc. to produce and market childrens clothing. It changed its brand name in 1937 to Health-tex, although Standard Romper remained the corporate name until 1971. In 1973, Health-tex was acquired by Chesebrough-Ponds Inc., a marketer of consumer products. Health-tex was sold in 1985 in a leveraged buyout to a group of investors who subsequently sold the firm to VF six years later.

In the early 1990s, VF was responding to consumer research results by returning to basic jeans manufacture, particularly for its primary market segment of women aged 25 to 44. It is working toward strengthening relationships with its retailers through increased advertising and merchandising support. In other areas, such as its sportswear and activewear businesses, VF is improving manufacturing efficiencies and restructuring operations to achieve better financial performance. Its intimate and occupational apparel lines continue to show healthy sales. VF International serves more than 150 countries with the companys jeanswear products and expects significant growth to occur with the creation of the single European market in 1992, as well as in the North American market.

Despite this positive outlook, VF Corporation faces a mature market for its denim jeans business, which will require major strategic initiatives to sustain growth in the future. The company is focusing on a combination of new product development, cost reduction, and inventory management measures to strengthen relationships with retailers and enable the firm to respond more effectively to market needs. VFs goal is to provide the right styles and quantities of products at the right prices on the retail shelf at all times. The companys ability to meet this goal will be a key determinant in the success of VFs future activities as it strives to maintain its leadership position, build market share, and increase shareholder value.

Principal Subsidiaries

Bassett-Walker Inc.; JanSport Incorporated; Jantzen Inc.; The Lee Company; Modern Globe Inc.; Red Kap; VF International; Vanity Fair; Wrangler; Health-tex Inc.

Further Reading

Eklund, Christopher S., and Christine Du-gas, Lee + Wrangler + Rustler = A New Blue-Jeans King. Business Week, August 11, 1986; Agins, Teri, Bottom Line: Once-Hot Lee Jeans Lost Their Allure In a Hipper Market, The Wall Street Journal, March 7, 1991; People, Product, Pride . . . The History and Heritage of VF Corporation and Its Divisions, VF corporate typescript [1991].

Sandy Schusteff

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VF Corporation

VF Corporation

founded: 1899



Contact Information:

headquarters: po box 21488
greensboro, nc 27408 phone: (336)547-6000 fax: (336)547-7630 toll free: (888)836-3971 url: http://www.vfc.com

OVERVIEW

VF Corporation is the leading making of jeanswear in the world and markets its products in the United States and Europe, as well as other international markets. Its brand name jeans, Lee, Rustler, Brittania, Chic, and Wrangler, hold over 20 percent of the U.S. jeans market, with Lee and Wrangler products available in countries around the world. VF Corporation also manufactures and markets intimate apparel, occupational apparel, knitwear, outdoor apparel and equipment, children's playwear and other apparel. The company is organized into four business segments: Consumer Apparel, Occupational Apparel, Outdoor Apparel and Equipment, and All Other.

VF Corporation's Consumer Apparel segment, which includes its jeanswear, intimate apparel, and children's wear, is its largest business group, accounting for nearly three quarters of the company's sales. In 2001, business conducted with the company's ten largest customers accounted for 43 percent of all sales. Wal-Mart is VF Corporation's largest single buyer, accounting for over 14 percent of total sales in 2001.




COMPANY FINANCES

Net sales in 2001 totaled $5.52 billion, a four percent decline from the previous year's record total of $5.75 billion. If the financial impact of acquisitions and divestitures are removed from the equation, sales declined by six percent. Net income posted for 2001 was $138 million, down from $260 million in 2000 and $336 million in 1999. Net sales in 2001 for the Consumer Apparel segment totaled $4.02 billion, compared to $4.23 billion in 2000. Occupation Apparel and All Other segments were also down from $662 million to $538 million and $490 million to $464 million, respectively. Only Outdoor Apparel and Equipment showed improved profits of $492 million compared to $368 million in the previous year. Basic earnings per share for 2001 fell by $1.06 to $1.19 from $2.25 in 2000. Stock prices reached the year's high of $42.70 during the second quarter of 2001 and hit the year's low of $28.15 in the fourth quarter. During the fourth quarter of 2001, year-on-year net sales slumped over 11 percent to $1.3 billion down from $1.46 billion the previous year, resulting in a net loss for the quarter of $113 million.




ANALYSTS' OPINIONS

Working in favor of the future success of VF Corporation, according to analysts, is its positive record of surviving economic recessions. During the economic slowdowns of both the early 1980s and early 1990s, VF Corporation significantly outperformed the market. The company's substantial sales to Wal-Mart, which are expected to do well despite the economy's health, place VF Corporation in a good position to weather a recession in the short- to medium- time range. Analysts also see the company's move to divest itself of unprofitable businesses and significantly reduce overhead costs as positive signs for the future. VF Corporation announced in the fourth quarter of 2001 that it would undergo restructuring and divest itself of several smaller businesses that represented approximately 5 percent of sales, including swimwear, private label knitwear, and a small work wear business. Although analysts anticipate the future benefit of the company's return to core businesses of jeanswear, intimate apparel and outdoor wear, restructuring costs as well as a continuing decline in demand are expected to affect the bottom line in 2002.

Because VF Corporation's major brands are mature and are experiencing rapidly increasing competition from mass market private label jeanswear outfitters, some analysts expect that growth, if consistent, will not be dramatic. In order to drive sales and profits more aggressively, the company will look to new acquisitions to push sales up at a faster rate. However analysts' opinions vary on the likely outcome of this strategy. Some view VF Corporation's mature core business as a solid foundation to generate growth. Recently acquired businesses, including Bestform, Eastpak, CHIC Jeans, Gitano, and The North Face, have all performed better than expected so far. Other analysts warn that growth through acquisition can be risky and often unsuccessful. Nonetheless, the consensus among analysts is that VF Corporation has made positive moves to restructure, and supported by a solid core of businesses, should continue to be a viable investment.

HISTORY

In 1899 a group of six men formed the Reading Glove & Mitten Manufacturing Company in Reading, Pennsylvania to produce knit and silk gloves. After a decade of slow sales, one investor, John Barbey, bought out his partners and renamed the company Schuylkill Silk Mills. In 1914 Barbey, along with his son J.E. Barbey introduced a line of silk lingerie. Three years later they ran a contest to find a brand name for the lingerie products. With a prize offering of $25, the contest was conducted and the name Vanity Fair won. Barbey then undertook an aggressive marketing campaign to promote Vanity Fair brand apparel, a unique strategy in the lingerie industry at the time as most intimate apparel was sold without brand names.

In 1919 the company's name changed to Vanity Fair Silk Mills Inc. With the intimate apparel business outperforming the glove business during the 1920s; gloves were discontinued. Vanity Fair began making its first acquisitions in 1969, including the purchase of H.D. Lee, a jeanswear manufacturer established in 1860, and Berkshire International, a hosiery company. As a result of the acquisitions, the company was reorganized; VF Corporation was established as a holding company, and Vanity Fair became a subsidiary. In 1979 VF Corporation, becoming serious about global expansion, opened an International Division. During the sluggish market of the early 1980s, VF Corporation responded by continuing to diversify through acquisitions. At the same time, the company tried to distinguish itself from its competitors by being the first to market separate product lines for men and women, and excelled as one of the first jeans makers to offer high-end and stretch jeans. The Ms. Lee brand became the best-selling line of women's jeans in the United States.

In 1986 VF Corporation greatly expanded its operations, becoming the largest U.S. apparel manufacturer, through the acquisition of Blue Bell Holding Company, owner of the Wrangler, Rustler, Jantzen, and Red Kap brands. In the late 1980s in order to boast sagging sales VF Corporation made the costly strategic decision to sell Lee jeans to mass marketers, angering its retail customers who stopped carrying the Lee brand in protest of its lower-level image. Not only did the company alienate the department store industry, it entered the already saturated market of mass merchandise in which it could not successfully compete. By the early 1990s VF Corporation sales and income figures had fallen. To make matters worse, Levi Strauss introduced the very successful Dock-ers brand, offering casual wear pants, which cut significantly into the sales of Lee jeans.

VF Corporation realized that it had stumbled and successfully recovered over the next several years. Sales grew from $2.95 billion in 1991 to $4.97 in 1994. During the second half of the 1990s, revenues rose steadily up from $5 million, and the company posted record sales in 2000 of $5.75 billion. Net income reached its peak in 1998 when the company reported $388 million. When the U.S. economy slid suddenly into an economic slump in 2001, VF Corporation found itself burdened by excessive inventory, which the company worked throughout the year to reduce. Having diversified outside its core businesses to sustain itself during the downturn in its jeanswear sales, the company outlined a new plan in 2001 to return to its main businesses and seek growth through acquisitions within the framework of the consumer apparel industry.




STRATEGY

VF Corporation's core strategies are: build strong brands that consumers know and want, focus on high volume basic apparel categories, expand international presence, and follow conservative financial practices and policies. The company's long-term financial objectives include: achieving sales growth of 6 percent, a return on capital of 17 percent, an operating margin of 14 percent, a debt-to-capital ratio below 40 percent, and dividend payouts of 30 percent. Growth by adding new businesses to the company's portfolio is expected to come in two forms of acquisitions: smaller brands valued around $100 million that can be quickly and easily integrated into VF's core businesses and lifestyle brands valued up to $500 million.

FAST FACTS: About VF Corporation


Ownership: VF Corporation is a publicly held company and trades on the New York Stock Exchange.

Ticker Symbol: VFC

Officers: Mackey J. McDonald, 55, Chmn., CEO, and Pres., 2001 salary $960,000, 2001 bonus $530,400; Robert K. Shearer, 50, VP and CFO, 2001 salary $360,000, 2001 bonus $151,500; T.L. Lay, 54, VP and Chmn., 2001 salary $495,000, 2001 bonus $194,600; J.P. Schamberger, 53, VP and Chmn., 2001 salary $495,000, 2001 bonus $194,600; E.C. Wiseman, 46, VP and Chmn., 2001 salary $345,000, 2001 bonus $161,500

Employees: 75,000

Principal Subsidiary Companies: VF Corporation is the parent of numerous well-known activewear, jeanswear, and intimate apparel, including Wrangler, Lee, Riders, Gitano, Rustlers, C.H.I.C., Health-tex, Eastpak, Brittania, JanSport, Lee Jeans, Vanity Fair Mills Inc., and Bestform Intimates, Inc.

Chief Competitors: The apparel market is highly competitive, and VF Corporation competes with a range of manufacturers. Sara Lee Corporation, maker of Leggs and Hanes, has sales that top VF Corporation's, and is the company's largest competitor in the intimate apparel market. Levi Strauss is the company's long-standing main rival in the jeanswear sector. In addition, because the company markets its different lines of apparel to a variety of markets, including specialty, department, and discount stores, it also competes with a broad range of apparel manufacturers, including Fruit of the Loom, The Gap, Guess?, Levi Strauss, The Limited, OshKosh B'Gosh, Reebok, Russell Corporation, and Warnaco Group.


To achieve its objectives VF Corporation will slim down its operations, exit under performing businesses, and focus on its major business segments. The company announced in the fourth quarter of 2001 that as part of its restructuring plan it would cut 13,000 jobs worldwide, close approximately one fifth of its plants, and move more production to low-cost contracts outside the United States and Europe. Facing increasing competition from private label jeans makers, the company plans to cut its prices on Rustler, Wrangler, Riders, and Lee brands, although the cuts will not be across-the-board but depend on the competition levels in individual markets. In Europe, where jeans sales are strong, VF Corporation will introduce a new line of high-end Lee jeans in 2002. Marketing budgets in all five business segments are also slated for increases.



INFLUENCES

VF Corporation is facing a two-pronged challenge. First, the apparel market in the United States, which accounts for 82 percent of all sales, remained soft into 2002. Second, as demand has decreased, competition has increased. Private label brands offer consumers more choices, often at lower prices than VF Corporation's name brand products. In 2001 approximately 569 million pairs of jeans were sold in the United States. VF Corporation held 21 percent of the market primarily with its Wrangler, Lee, and Rustler lines, which held the second, third, and fourth largest market shares of brand name jeans, respectively. However, private label jeans sold by major retailers held approximately 40 percent of the entire market. In order to remain competitive in this economic and market environment, VF Corporation has committed to reducing its costs in all areas of its operations. Resulting actions taken in 2000 resulted in $45 million of cost reduction, with anticipated savings of $100 million in 2002 and $30 million in subsequent years.



CURRENT TRENDS

As part of the 2001 restructuring plan, VF Corporation undertook actions to exit three under performing business, the most significant of which is the Private Label knitwear business that marketed fleece and T-shirt apparel to large U.S. retailers and other operating units within the VF Corporation family. The company will also shed its Jantzen swimwear business, a high-end, seasonal business with consistently low returns, and a small specialty work wear business that was negatively impacted by the downturn in the high tech industry. During the three years preceding 2001, the three businesses' total operating profit was $9 million, but all reported losses in 2001.

CHRONOLOGY: Key Dates for VF Corporation


1899:

A group of six investors in Pennsylvania form the Reading Glove & Mitten Manufacturing Co.

1911:

John Barbey buys out his five partners and changes the name to Schuylkill Silk Mills

1914:

Barbey conducts a contest to rename his business, awarding the winning contestant $25 for the name "Vanity Fair"

1937:

Operations move from Reading to Monroeville, Alabama, later relocating to Greensboro, North Carolina

1943:

Purchases H. D. Lee Co., Inc. and Berkshire International

1948:

Introduces an innovative new material, nylon tricot, which revolutionizes the lingerie industry

1950:

Vanity Fair receives the Coty Award for Design

1969:

Reorganizes at VF Corporation and Vanity Fair becomes a subsidiary

1979:

An international division is established in Europe

1986:

Becomes largest apparel manufacturer in the United States after acquiring Blue Bell Holding Company, maker of Wrangler Jeans as well as Rustler jeans, Jantzen and JanSport Swimwear, Red Kap occupational clothing

1991:

Acquires Health-tex, Inc., a manufacturer of children's clothing

1992:

Sales exceed $3 billion for the year

1995:

Annual sales reach $5 billion

2000:

Purchases Eastpak, Chic and H.I.S. jeans brands, and outdoor retailer The North Face

2001:

Announces plans to cut 13,000 jobs, close one fifth of its 150 U.S. plants, and move production to lower cost facilities overseas

In its efforts to reduce its operations base, the company closed 21 higher cost North American manufacturing facilities to reduce total production capacity and transition into a higher rate of outsourcing of manufacturing. The company obtains its products via two methods: VF businesses purchase raw material from suppliers, which are used to create finished products at company-owned manufacturing facilities; or the company contracts third-party companies to provide finished goods. VF Corporation has begun to rely more heavily on its company-owned facilities outside the United States and Europe where labor costs are significantly less expensive. The company is also using more contractors to supply its products. In 2001, 78 percent of all VF Corporation's products sold in the United States were produced internationally, and the company intends to increase that number to 85 percent in the future, leaving only 15 percent to U.S. domestic production. In 2001, 45 percent of all international merchandise was manufactured in company-owned facilities in Mexico and the Caribbean basin, and 40 percent was provided by contractors primarily located in Mexico, the Caribbean, and Asia.

Despite efforts to reduce costs and increase marketing, VF Corporation estimates a sales decline of 8 percent for 2002. Approximately half of the expected loss stems from business closures. The company also anticipates lower revenues as a result of the bankruptcy filing by K-Mart, one of its five largest customers, and the continued poor performance of sluggish market.



PRODUCTS

Within its Consumer Apparel segment, VF Corporation maintains three product-related groups: jeanswear, intimate apparel, and children's wear. The company's leading U.S. jeanswear products are Lee, Wrangler, Rustler, and Rider brands. Other jeanswear labels are Chic, Gitano, and Brittania as well as casual cotton pants and shirts under the Lee Casuals and Timber Creek by Wrangler names. By the end of 2002 the company plans to be complete owner of H.I.S., a jeanswear company in which it began investing in 2000. Lee and Wrangler are the most widely marketed brands around the world. Lee brands are generally sold through department and specialty stores, and Wrangler westernwear is distributed to western specialty stores. Hero by Wrangler, Rustler, and Riders brands are sold via the mass merchants as well as national and regional discount chains such as Wal-Mart. Chic, Gitano, and Brittania are also marketed to discount chains.

Intimate apparel is manufactured and marketed for distribution to domestic department, chain, and specialty stores under the names Vanity Fair, Lily of France, Exquisite Form, and licensed Tommy Hilfiger and Natori labels. Apparel includes bras, panties, day-wear, shapewear, robes, and sleepwear. Vassarette and Bestform are brands produced for the discount store market.

The Children's Playwear division manufactures and markets Healthtex and Lee brands as well as licensed Nike and Michael Jordan apparel. Products are distributed primarily department and specialty stores. Health-tex is also available directly to consumers at its Web site, www.healthtex.com.

Occupational Apparel is marketed in the United States under the Red Kap name. More than half of all sales are to industrial laundries that supply work clothes primarily on a rental basis to companies who require onthe-job clothing for production and service employees. Apparel items include work pants, slacks, work and dress shirts, overalls, jackets, and smocks. VF Corporation also supplies restaurant and safety uniforms under the brand names Penn State Textiles and Bulwark, respectively. Corporate image apparel is marketed through VF Solutions. VF Corporations maintains Web-based catalogs and online ordering services for several of its major customers, including FedEx, American Airlines, and the U.S. Customs and Immigration and Naturalization Services.

Outdoor Apparel and Equipment markets products under three brand names: The North Face, Jansport, and Eastpak. The North Face, which is sold in the United States, Europe, and Asia, provides high performance outerwear, snowsports wear and functional sportswear and equipment such tents, sleeping bags, backpacks, and daypacks. The North Face is sold to specialty outdoor and high-end sporting goods stores. In the United States, the brand is also sold through ten company-owned showcase retail stores. Daypack manufacturer Jansport, which holds the leading market share in the United States, is sold through department and sporting goods as well as college bookstores. Jansport is also available in Europe and Asia. Eastpak, also specializing in daypacks, was acquired in 2000 and merged into Jansport operations in the United States. Jansport products are distributed to mass market and specialty stores in the United States and Europe.

The All Other segment consists primarily of knit-wear apparel including sports apparel under licenses granted by major American professional sports leagues. Also included in this group is a chain of approximately 50 retail outlet stores located across the United States that sells primarily overruns of first quality products.

NYLON TRICOT

During the 1940s Vanity Fair pioneered the use of innovative material in its lingerie because of an embargo on silk during World War II. The company began using rayon and in 1948 introduced nylon tricot, which revolutionized the intimate apparel industry. The material was strong, durable, elastic, and easy to care for, and could be dyed a wide range of popular colors.




CORPORATE CITIZENSHIP

VF Corporation sponsors various sporting, music and other special events, including Wrangler National Finals Rodeo and the Lee National Denim Day fundraiser for the Susan G. Komen Breast Cancer Foundation. The company requires all contractors to abide by strict standards covering hours of work, age of workers, health and safety conditions, and conformity to all laws and regulations. VF Corporation periodically audits its contractors to check for compliance.




GLOBAL PRESENCE

VF Corporation owns manufacturing operations in several countries outside the United States including France, Spain, Malta, Tunisia, Poland, and Turkey. Internationally VF Corporation is the largest jeanswear manufacturer in Western Europe. Where its products are not directly marketed, the company markets its merchandise via licenses and distribution contracts. Branded jean-swear sold internationally include Lee, Wrangler, Hero by Wrangler, Maverick, and Old Axe. Products sold in Europe tend to be more fashion-driven, higher-end apparel. Lee brand products are marketed in China with plans to introduce the Wrangler brand to the country in 2003. Lee and Wrangler brands are marketed in Canada and Mexico and in South America through company-owned operations in Brazil, Argentina, and Chile. In Europe intimate apparel is sold to department and specialty stores under the names Lou, Bolero, Gemma, Intima Cherry, and Belcor. Discount stores brands in the European market include Variance, Vassarette, and Best-forms. Vanity Fair and Exquisite Form products are also available in Europe. All three outdoor apparel brands, The North Face, Jansport, and Eastpak, are available in Europe and are marketed in Asia via licensees and distributors.




EMPLOYMENT

At the end of 2001, VF Corporation's workforce totaled approximately 71,000. However, 13,000 jobs are slated for dissolution according to the restructuring plan set out in 2001.

SOURCES OF INFORMATION

Bibliography

clark, evan. "vf losses hit $112.6m in quarter." wwd,13 february 2002.

cunningham, thomas. "vf in major restructuring; firm to take up to $320 million in charges, increase offshore sourcing, tighten focus." daily news record, 19 november 2002.

grant, tina, ed.international directory of company histories. vol. 17. detroit: st. james press, 1997.

malone, scott, and joshua greene. "denim dish." wwd, 14 february 2002.

"vf corporation." hoover's company profiles. available at http://www.hoovers.com.

"vf corporation." multex.com. available at http://www.multex.com.

"vf cuts a new pattern." business week, 26 november 2001.

vf corporation home page, 2002. available at http://www.vfc.com.


For an annual report:

on the internet at: http:\www.vfc.com.


For additional industry research

investigate companies by their standard industrial classification codes, also known as sics. vf corporation's primary sics are:

2325 mens & boys separate trousers & slacks

2339 womens misses & jr outerwear, not elsewhere classified

2253 knit outerwear mills

2254 knit underwear & nightwear mills

investigate companies by their north american industry classification system codes, also known as naics codes. vf corporation's primary naicss are:

315191 outerwear knitting mills

315192 underwear and nightwear knitting mills

315224 men's and boys' cut and sew trouser, slack and jeanmanufacturing

315999 other apparel accessories and other apparel manufacturing

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VF Corporation

VF Corporation

CUT TO BE NOTICED CAMPAIGN
FIND YOUR ONE TRUE FIT CAMPAIGN
RUGGED WEAR CAMPAIGN

105 Corporate Center Blvd.
Greensboro, North Carolina 27408
USA
Telephone: (336) 424-6000
Fax: (336) 424-7631
Web site: www.leejeans.com

CUT TO BE NOTICED CAMPAIGN

OVERVIEW

The Lee Apparel Company, a division of VF Corporation, piloted an image-altering advertising campaign that began in the autumn of 1995 and continued through 1997. Lee hoped to update its brand image in the increasingly cutthroat denim market to become relevant to a younger, hipper consumer group. Lee brand jeans had long been the favorite among female adults, and the company's marketing campaigns revolved around the message that Lee jeans were comfortable and fit well. In the 1990s, however, competition in the jeans market grew, and comfort was no longer a strong selling factor for consumers faced with numerous choices.

Fashion-conscious youths and young adults, who accounted for a large portion of denim sales, desired jeans that made them look "cool," that conveyed an attitude and a hip image. To attract this consumer group, Lee and its advertising agency, Minneapolis-based Fallon McElligott, produced a series of television spots that marked a departure from past Lee ads that relied primarily on humor to promote its jeanswear. The new ads, filmed in black and white, featured attractive, young, Lee-jeans-wearing men and women in search of romance. In the spots the desired party wore Lee jeans, which suggested that those who wore Lee jeans looked enticing. Ellen Rohde, Lee's vice president of strategic planning and advertising at the time of the campaign launch, explained, "Our goal is to get young adults thinking about Lee in an entirely different way." She added, "Now that they know us as the brand that fits, we'll be working hard to promote our new products and updated image to develop an emotional connection with them."

HISTORICAL CONTEXT

VF Corporation, one of the world's largest publicly held clothing manufacturers, had the apparel industry covered from head to toe. In the 1980s and 1990s, VF acquired a number of companies to stay competitive in the increasingly crowded clothing market. VF owned businesses that manufactured intimate apparel and lingerie, swim-wear, sports apparel, children's clothing, and outdoor gear, such as daypacks. The company's jeanswear division, the largest portion of the company, included the Wrangler, Rustler, and Riders brands along with Lee.

Though the denim market continued to grow through the 1990s, the apparel industry overall hit a snag in the mid-1990s as consumers tightened their pocketbooks. Many in the industry felt the pinch, including VF, which saw profits decline nearly 20 percent in 1995. VF reevaluated its business strategies and decided it needed to create demand and coax consumers to buy, and to that end VF chose to create products geared toward specific consumer groups and to freshen the images of its many brands.

For previous marketing campaigns, Lee had relied on humor to send the intended message that Lee jeans were comfortable, and many spots promoted the tag line "The brand that fits." Many television ads featured women attempting to squeeze into ill-fitting jeans. One spot starred a man singing in the shower in a baritone voice. As he got dressed and put on his non-Lee jeans, he suddenly became a soprano, indicating that the jeans were too tight. Although these ads successfully educated viewers about the comfortable fit of Lee jeans, they did not provide any other compelling reasons for purchasing Lee jeans, least of all that they were "cool."

TARGET MARKET

Lee traditionally targeted adult women and had enjoyed success with this audience. For many years, including 1996, Lee was the top-selling women's jeans brand. Lee decided to shift its aim toward younger consumers in the mid-1990s as Lee introduced trendier styles, such as the Lee Riveted jeans line featured in the "Cut to Be Noticed" campaign. According to Adweek, Lee Riveted jeans were geared toward style- and image-conscious young adults who wished to be viewed as fashionable and attractive. The youth market, particularly teens, accounted for a large portion of denim sales, and many jeans manufacturers clamored to win their approval. Lee vice president Gordon Harton emphasized the importance of attracting youths in Business Week and noted, "By the time they're 24, they've adopted brands that they will use for the rest of their lives." Lee believed its Lee Riveted line would appeal to young adults as well as teens, and thus the "Cut to Be Noticed" campaign was geared to those aged 18 to 34.

When young adults shopped for jeans, the status and stylishness of the jeans played heavily into their decisions, so Lee decided to veer away from their traditional ads that focused on comfort and fit. Ellen Rohde told USA Today that consumers felt Lee's old ads were out-of-date. The old ads were humorous in a slightly embarrassing manner, which grated against the target audience's intent of looking "cool." By producing stylish spots filled with good-looking young men and women wearing Lee jeans, Lee hoped to successfully energize its brand image and generate sales. According to the Associated Press, Mackey McDonald, VF's CEO, declared, "We will be emphasizing not only that Lee jeans are comfortable, but that they're flattering, they make you look good and feel good."

COMPETITION

The jeans industry grew dramatically in the 1990s, and everyone scrambled to get a piece of the pie. According to market research firm NPD Group, U.S. jean sales hit $10.65 billion in 1996. Although VF Corp., with about 27 percent of the jeans market, continued to dominate the denim arena, the company finished second to competitor Levi Strauss & Company as the world's largest apparel manufacturer. USA Today also indicated that in 1996 Lee placed second, with 12 percent of the market, in terms of denim sales in department and specialty stores, which sold about 280 million pairs of jeans annually. Levi's commanded 28 percent.

VF's jean brands overall, however, enjoyed increasing sales in the denim market. According to figures from research firm Tactical Retail Solutions, Levi's held a market share of 48.2 percent in the men's denim market in 1990, while VF followed with 22.1 percent. Levi's share shrunk to 26.2 percent by 1997, whereas VF's grew to 31 percent. In the women's market, VF had a 14 percent share in 1990, and Levi's held 8.5 percent. VF's share increased to 16.2 percent in 1997, but Levi's share rose as well, to 9.3 percent.

DENIM DIFFERENCES?

Curiously, many jeans manufacturers produced oddly similar advertising campaigns in the 1990s. Levi's, Lee, and even J.C. Penney rolled out stylized, image-conscious vignettes starring handsome young men and women in various styles of jeans. Were these companies trying to differentiate their brands from others, or were they hoping to be mistaken for another line? Marketing consultant Jack Trout told USA Today, "One of the risks Lee may be running with its new hip ads is consumers might think they're trying to be more like Levi's and less like themselves."

VF had to contend not only with Levi's competition, but also with a market increasingly crowded with private-label jeans manufacturers and designer labels. Tommy Hilfiger, Ralph Lauren, Donna Karan, and Calvin Klein were among the designers producing high-end jeans. In 1997 designer labels accounted for about 4 percent of the market in both the men's and women's markets. Private-label jeans posed a stronger threat: In the men's market, the share held by private-label manufacturers rose from 3.2 percent in 1990 to 19.1 percent in 1997. In the women's market, the share rose from 3.1 percent to 30.1 percent. According to the Los Angeles Times, J.C. Penney's Arizona Jeans line grew into a $1 billion line in a mere six years, and Sears, Roebuck's Canyon River Blues line, only two years old in 1996, enjoyed more than $200 million in sales and blossomed into the company's largest private-label clothing line.

MARKETING STRATEGY

In an increasingly competitive denim market, Lee needed to make an impact on or connection with consumers. Fallon McElligott's Harvey Marco told Adweek, "Lee wanted to rebrand itself…. They felt they weren't being taken seriously as a fashion brand." The "Cut to Be Noticed" campaign was Lee's vehicle for ensuring its jeans would be noticed and the brand's image updated. To appeal to the target market, the stylized, black-and-white television spots emphasized relevant issues for the 18-to-34 age group, such as taking risks with romance, the awkwardness of meeting someone new, and feeling attractive and confident thanks to fashion. Lee did not dispense with humor completely, but the "Cut to Be Noticed" spots involved humor meant to be endearing and touching rather than campy.

To specifically reach the target audience, Lee relied heavily on cable television. In the past, Lee opted for mass-market appeal and televised spots on network television. Jamie Lockard, Lee's director of advertising, explained the advantages of buying time on cable television to Adweek and said, "There is an extremely high likelihood that you can find a specific outlet for your message on cable, one that closely matches up your merchandise with the people whose attitude and lifestyle make them the best possible target for your product." Because of this strategy, the "Cut to Be Noticed" spots appeared on MTV, Comedy Central, and also on Fox.

The campaign first launched in September 1995 with "Ferry Boat" and "Dandelion." "Ferry Boat" continued to air through 1997 because of its popularity. Initially intended to lure female consumers ("Dandelion" targeted males), the spot starred a Lee-jeans-wearing young woman on a ferryboat. Her car boasted an Ohio license plate, and suitcases rested atop the roof. As the ferryboat prepared to leave the dock, a truck screeched into the parking lot, and a young man sprinted onto the boat. He found the woman on the deck, cautiously handed her a necklace, and said, "Excuse me, but you dropped this back there." When she asked, "Where?" he replied, "In Nebraska." The spot ended with the tag line, "Cut to fit."

Two new spots, "Coffee Shop" and "Laundry Room," began airing in 1996 and were televised through 1997. These ads also played on the theme of taking extreme measures to meet the desired person in Lee jeans. In "Coffee Shop" a young man sat in a coffee shop, drinking cup after cup of coffee. His waitress wore Lee jeans, and it was clear he hoped to meet her. The hours passed, and the waitress placed the "Closed" sign on the door. She asked the young man if he wanted anything else, and he nervously suggested, "Well, ummm, maybe if you're not busy … maybe we can go … get a cup of coffee?" He then looked defeated by his comment, and the screen cut to the Lee Riveted logo and a final shot with the tag line, "Cut to be noticed."

In "Laundry Room," a male in Lee jeans was the target of affection. A young woman in the laundry room of an apartment building pushed dollar after dollar into the change machine until the "out of change" light began to flash. As she sat down, a young man entered the room with his laundry. He approached the change machine, but, to his dismay, it was empty. He looked around, spotted the young woman, and walked up to her. "Excuse me. Do you have any change?" he asked. She nonchalantly replied, "Ummm … let me check," and slid her purse full of quarters under her chair with her foot. The implication was that Lee jeans made one irresistible. Fallon McElligott's Dean Buckhorn, a copywriter who worked on the campaign, told Adweek, "There's someone going to great lengths to meet the hero wearing Lee jeans." Though some of the scenarios may have seemed farfetched, Buckhorn explained that they were based in reality. "We were trying to go for a situation we've all been in."

OUTCOME

Consumers responded positively to the "Cut to Be Noticed" campaign. Company research indicated that the initial spots were on target with the intended audience and that both men and women enjoyed the ads. Gordon Harton noted, "[The consumers] seem to relate to the product benefit in the spots—being attractive to the opposite sex because you look and feel great in Lee jeans." According to a poll conducted by USA Today that determined the popularity of all the spots that aired during the 1996 Olympic Games, "Laundry Room" ranked fifth with the under-35 age group. The survey also found that "Laundry Room" was the ninth most popular overall. "Coffee Shop" was voted one of the best ads of July 1996 by Adweek, and the campaign did relatively well with Ad Track, USA Today's poll that measured the popularity and effectiveness of an advertising campaign. Of those surveyed, 22 percent said they enjoyed the ads a lot and 19 percent felt they were effective. With the younger crowd, those aged 18 to 24, the campaign was more successful—28 percent really liked the spots, and 24 percent found them effective.

The jeanswear division of VF Corp. accounted for nearly 54 percent of the company's total revenues in 1996, and despite increased competition in the denim market, VF enjoyed increased sales through 1997. The jeans market swelled to a $12.5 billion market, and VF continued to grow. Lee president Terry Lay spoke with CNN's Biz Buzz and noted that NPD Group figures indicated that Lee's market share grew 16 percent in the first half of 1998. Adweek reported NPD Group data that showed a 2 percent increase in Lee's market share with women in the 20-to-34 age group in 1996, as well as a 13 percent rise among males aged 14 to 19. In early 1998 Standard & Poor upgraded its ratings outlook on VF Corp. from stable to positive, and VF appeared on track to reach its goal of generating $7 billion in revenues by the year 2000.

FURTHER READING

Enrico, Dottie. "Lee Jeans' 'Hip' Visuals Fit Young, Affluent Consumers." USA Today, July 8, 1996.

Garfield, Bob. "Lusty Jeans Watchers Provide Pants for Lee." Advertising Age, July 22, 1996.

Haley, Kathy. "Lee Zeroes in on Younger Customers." Adweek, March 24, 1997.

Martin, Ellen Rooney. "Fallon McElligott's Black-and-White Television Campaign for Lee Apparel Co." Adweek, December 16, 1996.

―――――――. "True Believers." Adweek, December 16, 1996.

Rosenberg, Joyce M. "There's a War out There, and VF Boss Knows It." Associated Press, February 7, 1996.

                                              Mariko Fujinaka

FIND YOUR ONE TRUE FIT CAMPAIGN

OVERVIEW

In 2003, Lee Jeans, a division of VF Corporation, was a 114-year-old company whose brand of women's jeans, Lady Lee Riders, had been a staple of closets for more than 50 years. But Lee was losing young women customers to trendier brands that were tailored and marketed directly to them. Lee's challenge was to shake off the perception of young women that the brand was unfashionable, uncool, and a style their mothers wore, not a pair of jeans a hip young woman would buy.

To change this perception and to convince young women between the ages of 18 and 34 to come back to the brand, Lee introduced the One True Fit jeans. The introduction was supported by a marketing campaign, "Find Your One True Fit," developed by the company's longtime agency, Minneapolis-based Fallon Worldwide. Although the exact cost of the campaign was not revealed, according to Adweek, Lee spent $6 million and $7 million on advertising in 2001 and 2002, respectively. For the initial launch in 2003, Fallon focused exclusively on television spots that ran on the major broadcast and cable networks, including ABC, CBS, NBC, Fox, MTV, and E! Entertainment Television. In 2005 the campaign shifted to print media and was broadened to include older women who also wanted better fitting jeans. Ads appeared in such national magazines as People, More, and Marie Claire.

The "Find Your One True Fit" campaign was well received both by the consumers it targeted and by the media. Shortly after the campaign's launch, Lee reported a 20 percent overall sales increase compared with the same period in 2002. Further, consumers' positive perception of the brand jumped from 25 percent prior to the campaign to 47 percent after it had begun. In 2003 Marie Claire named One True Fit an "Editor's Pick," and in 2004 Health Magazine named the brand "Dream Jeans." In 2005 the campaign won a Silver EFFIE.

HISTORICAL CONTEXT

Lee Jeans was founded in 1889 as a dry goods company. The firm began manufacturing its own brand of work clothes in 1911 when the founder, Henry David Lee, became dissatisfied with the quality of merchandise his suppliers were providing. From work clothes the brand grew to include a variety of product lines that ranged from western to casual wear. In 1949 Lee introduced Lady Lee Riders, the first line of women's jeans. Lee became the first brand to offer women's jeans with multiple fits, which were introduced in 1983. But as niche brands offering fashion jeans, such as Gap, Mudd, American Eagle, and Express, went after women under the age of 30, Lee's sales began to suffer. To reverse its sales decline and attract younger consumers, Lee developed a spin-off of its women's brand, described by the company as "The brand that fits for her mother," and introduced One True Fit jeans. The new style was based on its popular five-pocket jeans worn by generations of women, but it had a contemporary flair that met four criteria young women said they wanted: style, comfort, looks, and a construction that made women's derrieres look good as they walked away.

TARGET MARKET

Throughout the 1980s and into the early 1990s Lee consistently held the number one share in the women's denim jeans category. But the brand's customers were aging, and Lee jeans began to develop the reputation of not being the type of jeans worn by hip, younger women. Thus, attracting under-30 women was the challenge facing Lee in 2003. The "Find Your One True Fit" campaign was designed to reach young women who were no longer shopping in the junior department but who were not yet ready for the missy department. Lee's target audience was 18- to 34-year-old women who were recent college graduates starting new careers, getting married and having children, buying homes, and facing other transitions. Despite the changes that were occurring in their lives, these women still cared about looking good and dressing in style. For them getting older did not mean giving up sexy clothes and dressing like their mothers. Liz Cahill, Lee's director of advertising, told Adweek that One True Fit jeans had evolved from research indicating that young women liked the Lee jeans style but wanted jeans with a new fit. "She is no longer a junior and not quite a missy. We did fit try-ons like crazy. Luckily, she is still willing to try new things," Cahill said of the target consumer.

COMPETITION

Levi Strauss & Company had invented denim jeans in 1853. By 2003, although Levi's had been in a five-year sales slump, it was still the most recognized brand in the denim category. Taking credit for inventing jeans, Levi Strauss also took credit for reinventing jeans when, in February 2003, it introduced a new brand—Typ. 1 Jeans—and supported it with a marketing campaign using print ads. The initial ads, one of which appeared in the swimsuit issue of Sports Illustrated, were described as bold and sexy, like the new jeans being promoted. The ad that appeared in Sports Illustrated featured model Liliana Domínguez wearing Typ. 1 Jeans and a denim jacket and standing near a hubcap. After the initial launch, ads ran in other national magazines, including Allure, Teen People, GQ, and Spin. Outdoor advertising featuring Typ. 1 Jeans appeared in New York's Times Square and in Los Angeles on the Hyatt Regency Hotel on Sunset Boulevard. Television spots for the campaign began running in June 2003. Also in 2003, to increase its reach with consumers, Levi introduced a spin-off jeans line—Levi Strauss Signature—that was offered for sale in Wal-Mart stores.

Like Levi Strauss, Gap was on a downward spiral in the denim jeans category. In 2000, after shifting the focus of its marketing and product branding away from its core customers, baby boomers, and toward the teen market, Gap went into a 22-month sales decline. The chain reported a 24 percent drop in sales in April 2002 at stores open one year or more. To win back its customers and reverse its sales decline, Gap revamped its product offerings, shaking off glitzy, trendy merchandise and bringing back the staples that customers had come to expect, including basic T-shirts, khakis, and denim jeans. Supporting Gap's effort was a marketing campaign titled "For Every Generation." The new campaign included television spots and print ads with a full roster of celebrities wearing Gap jeans and other items of clothing from the brand. Print ads included a 12-page insert that ran in Vogue, GQ, InStyle, and Rolling Stone. Television spots, which focused on Gap jeans and their fit, featured appearances by such stars as comedian Whoopie Goldberg, country singer Willie Nelson, and actresses Gena Rowlands and Sissy Spacek.

MARKETING STRATEGY

Fallon Worldwide had worked as the creative agency for Lee Jeans since 1986. The agency's "Coincidences" campaign, launched in 2002, helped revive the Lee Dungarees brand after it had slipped among its target market of young men between the ages of 17 and 24. The campaign was successful in achieving its goals of restoring the cool image of the brand among young men and improving sales, and it won a Silver EFFIE in 2004. Thus it was that in 2003 Fallon developed the campaign to rejuvenate another of Lee's fading brands, this time women's jeans. The "Find Your One True Fit" campaign tackled the challenges of convincing young women that Lee jeans were not just for their mothers, and like the campaign for Lee Dungarees, it was designed to restore the image of the brand as cool. To assure that the campaign for One True Fit jeans reached its target audience, it was developed through the efforts of an all-female team whose members were in the same demographic.

NATIONAL DENIM DAY RAISES MONEY FOR BREAST CANCER RESEARCH

For the 2003 National Denim Day, Lee Jeans signed actress Christina Applegate as its spokeswoman. Since its inception the annual event, which was introduced by Lee Jeans in 1996, has raised millions of dollars for the Susan G. Komen Breast Cancer Foundation. National Denim Day encourages employers to let staff members make a $5 donation in exchange for wearing jeans to work on a specific day each October. In 2003 the wear-jeans-to-work day was October 10. Applegate, best known for her role as Kelly Bundy in the 1990s hit television show Married with Children, was chosen by Lee Jeans to promote the event because her mother was a breast cancer survivor. Applegate also fell into the target consumer demographic for Lee Jeans, contemporary women shoppers in their mid-30s.

Because women were often bombarded with print fashion ads, the "Find Your One True Fit" campaign was initially limited to television spots that had their debuts during the telecast of the 2003 Emmy Awards. This was followed with spots that aired on the major national networks—ABC, CBS, NBC, and Fox—and cable networks, including MTV and E! Entertainment Television. The initial spots, titled "Find Your Edge" and "Find Yourself," were described as a tribute to young women and how they felt when they thought they looked good. Harvey Marco, the Fallon's group creative director, explained in an interview with Business Wire that, although they were uncomplicated, the spots were meant to connect with women on several different levels. "This campaign is sexy, cool and relevant to the target audience," he said.

Additional television spots were developed for subsequent use and were aired throughout 2004. One spot, titled "Happy Place A," featured the seductive music of the French singer Pierre Avia performing "Why Should I Cry." The spot opened with a close-up of an attractive 20-something woman and then followed her through a variety of situations, all starting with the advice "Find your …" Included were shots of the woman in the bathtub, with "Find your sanctuary;" pulling on and zipping up a well-fitting pair of Lee jeans, with "Find your center;" playing a guitar, with "Find your voice;" jumping off a balcony into a swimming pool, with "Find your fear;" and speeding away in a white Porsche, with "Find your escape." The spot concluded with a rear view of the woman walking down a hall dressed in her Lee jeans and the text "Find your one true fit. Lee Jeans." Another spot, "Happy Place B," was an abbreviated version of the first.

The television spots in the "Find Your One True Fit" campaign ended in 2005, and the focus then shifted to print advertising. Ads ran in national fashion and women's magazines, including Glamour, InStyle, People, Redbook, More and Marie Claire. One print ad showed a woman standing on a beach dressed in Lee jeans and holding a puppy on her shoulder. The text read, "Write your own fashion statement. Have you found your perfect fit? Lee." Cahill said that the campaign was also broadened in 2005 to appeal to the mothers of the young women in the original target demographic. In a company press release she stated that the One True Fit brand was able to satisfy the needs of many women: "Women want to look good no matter what life stage they are in or title they carry."

OUTCOME

The "Find Your One True Fit" campaign for Lee Jeans achieved its goals of reversing the perception of younger shoppers that the brand was not fashionable or cool and that it was the jeans of choice only of their grandmothers. The company reported that within two months after it was launched the campaign had succeeded in increasing the positive perception of the product among consumers. A 2003 tracking study by Lee Jeans found that prior to the campaign, 25 percent of consumers surveyed thought its jeans were fashionable, compared to 47 percent who felt they were fashionable after the campaign had been introduced. In addition, one week after the launch of the campaign, Lee Jeans reported that One True Fit jeans had increased the company's overall sales volume by 20 percent compared to the same period in 2002.

In 2003 Marie Claire magazine named One True Fit jeans its "Editor's Pick" as the most flattering jeans for women with all figure types. In 2004 Health Magazine named them "Dream Jeans" for their ability to please all of the women on the publication's editorial staff. Further accolades for the "Find Your One True Fit" campaign included a Silver EFFIE in 2005 for achieving "significant gains in Lee's fashion imagery, coolness and purchase consideration."

FURTHER READING

Burrows, Dan. "Denim Dish: Lee Jeans to Debut High-End Jeans Called Lee Authentics, Developed in Europe." WWD, August 7, 2003.

"Curve Appeal." Mommy Too! Magazine, January-February 2005, p. 4.

DeMarco, Donna. "Gap Goes Back to Basics to Stop Sales Slouch: Retailer Returns to Less Flashy Clothes." Washington Times, May 10, 2002.

"Lee Jeans Helps Women Find Their One True Fit: Denim Powerhouse Introduces New Line, a New Ad Campaign." Business Wire, June 11, 2003.

"From Packs to Jeans, VF Meets Back-to-School Needs with High-Value, High-Style Innovations." Business Wire, August 1, 2003.

Kleinman, Rebecca. "Lee Denim Taps Applegate." WWD, June 5, 2003.

"Lee Serves Up Mid-Tier Missy." DSN Retailing Today, March 22, 2004.

"Levi's Typ. 1 Jeans Print Campaign to Break in Sports Illustrated Swimsuit Issue: Levi's to Co-Host Live Webcast at Exclusive Sports Illustrated Swimsuit Event to Mark the Unveiling." Business Wire, February 13, 2003.

Lockwood, Lisa. "Jeans Advertising: In Search of Steam." WWD, July 17, 2003.

MacMillan, Carrie. "Majoring in the Classics." Promo, May 1, 2003.

Malone, Scott. "True Blue. Jeans Marketing." WWD, June 23, 2003.

"Moms Are Getting Hip and Hot: Historic Jeans Maker Is Primed; Lee Jeans Touts Its One True Fit Jean the Choice of Hot Moms." PR Newswire, February 1, 2005.

O'Loughlin, Sandra. "Strategy: Lee Jeans Launching One True Fit in Move to Extend Market." Adweek, January 13, 2005.

Seckler, Valerie. "Levi Makes Advertising Return to Times Square: Levi Strauss & Co. Has Leased a 45-by-45-Foot Billboard on Times Square." WWD, February 3, 2003.

"Type 1 Gets Makeover." Advertising Age, June 30, 2003.

                                              Rayna Bailey

RUGGED WEAR CAMPAIGN

OVERVIEW

Wrangler, Inc., a division of VF Corporation, launched a new line of clothing in 1993. The Rugged Wear line featured sturdy fabrics, camouflage patterns, and layers of warmth to appeal to those who enjoyed hunting, fishing, and other outdoor activities. Already a major player in the western wear and blue jeans segments of the apparel industry, Wrangler intended for Rugged Wear to complement the company's existing market niches. In the fiercely competitive clothing industry, image was often a substantial factor in an item's sales. Like cars, clothes conveyed a definite message about the consumer who chose them.

In order to craft such an image for its Rugged Wear line, Wrangler turned to its advertising shop, the Martin Agency, in 1997. The resulting "Rugged Wear" campaign relied on striking visual scenes and clever copy to distinguish Wrangler's outdoor line from those of its competitors. Consisting of three print ads, the "Rugged Wear" campaign appeared in magazines, on billboards, and in stores where the clothes were sold. One ad was for Wrangler Fishing Pants and pictured a laden clothesline. Four cats climbed up the legs of a pair of khaki pants hanging on the line. The text asserted, "Experts agree. Wrangler Anglers are true fishing pants" and concluded with a witty aside, "Sorry, fish smell not included." A chameleon sporting a pair of Wrangler Camouflage Jeans provided a humorous focus for a second ad: "Wrangler Rugged Wear. The #1 choice of incognito hunters." The third ad, for the brand's briar-resistant Teflon-coated field pants, did not show the actual product. Instead, it showed a vast briar field with a leg-shaped clearing in it. The implication was that the Wrangler wearer had been able to slice easily through the thicket thanks to his pants. Each ad was bordered by stitched leather and displayed the line's logo, which appeared to be branded into leather: "Wrangler Rugged Wear. Geared for the Outdoors."

Wrangler was pleased with the results of the campaign. Its new line proved to be a good bridge to Wrangler's traditional western wear line, and the campaign itself was quite well received by consumers. Some went so far as to contact the company for copies of the ads to hang in their homes. The advertising community praised the ads as well, bestowing several awards on the campaign, including the prestigious Addy Award.

HISTORICAL CONTEXT

Blue jeans were invented in the 1850s as sturdy work clothes for cowboys, ranchers, and miners in the American West. In the 1950s film stars James Dean and Marlon Brando popularized the denim pants as the clothing of choice for rebellious and trendy youth. By the 1970s, when "designer" brands such as Jordache, Gloria Vanderbilt, and Sergio Valente became popular, jeans had become as much about fashion, style, and image as they had about comfort and durability. "Jeans are a badge," Angelo Lagrega, a Wrangler executive, told the Greensboro News and Record. "When you wear a jean, you are making a statement."

Wrangler, a division of VF Corporation, had forged a specialized image for its own products that was distinct from the mainstream appeal of rival Levi's or ultra-fashionable designer brands popular with a younger urban generation, such as Calvin Klein, Nautica, and Tommy Hilfiger. Wrangler had instead staked its claim in the Western wear segment of the market. Fifty-five percent of the brand's sales came from its Western products, which clothed America's real and aspirational cowboys. Western wear was "the crown jewel and the real heritage of the company," Lagrega said in the Daily News Record. "We dominate that business." The company also produced Wrangler Hero, a less expensive mainstream line of clothing intended to be sold at nationwide chain stores like Wal-Mart and Kmart.

In the course of its long-term business relationship with the Martin Agency, Wrangler had learned the value of niche marketing to sell its products. A director of media planning at Martin related to Brandweek the strategy the agency devised for its client: "We told Wrangler, 'You don't need to be in New York, and you don't need to be in San Francisco.'" In other words, Wrangler placed its primary emphasis on people who would use its products for work and play, rather than as fashion accessories. Thus, instead of buying air time during mainstream television shows, Wrangler diligently pursued its cowboy aficionados. To raise its profile in this market, the company became an exclusive sponsor of the 1996 Country Music Awards and used country music star George Strait as a celebrity endorser. In addition, Wrangler sponsored rodeo events and rodeo stars Ty Murray and Joe Beavers. This focus on real cowboys paid dividends in the broader market as well. Because of its authenticity, the company came to have a strong appeal for yuppie cowboy-wannabes—who were attracted to the brand's cachet and image—without having to advertise heavily in the urban markets where these consumers lived. Lagrega succinctly encapsulated Wrangler's tactics to the Daily News Record: "We're using a rifle approach, not a shotgun approach…. We find large niches to attack, and then advertise to our consumer." The quest for new market niches led to the introduction of the Rugged Wear collection.

TARGET MARKET

The launch of Wrangler's Rugged Wear marked a point of departure for the company. The line's distinctive items such as camouflage-patterned jeans, jackets, and hats, thermal jeans, and Teflon-coated field pants did not at first glance neatly conform to the company's two target markets: Western admirers (and Westerners) and mainstream consumers shopping at mass market stores. The Rugged Wear line was designed for fishing and hunting, for hacking through a thicket or waiting for ducks on a chilly, pre-dawn pond—not for the rodeo and country music scene embraced by Wrangler's Western wear. According to the Daily News Record, however, Wrangler and other Western wear manufacturers and retailers had found that "the traditional Western consumer tends to be a rancher, hunter, fisherman, or hiker anyway."

According to John Boone and David Oakley, the creative team at Martin who crafted the "Rugged Wear" campaign, the ads targeted consumers who had relied on Wrangler for Western wear and who would be pleased to realize that their favorite brand also made tough clothes for outdoor activities. The campaign specifically sought to appeal to men aged 25 to 49 who fished, hunted, and enjoyed the outdoors lifestyle.

Unlike many of its competitors' campaigns, the "Rugged Wear" campaign attempted to use striking images and humor to reach its target audience. The subtle wit of the campaign was meant to show respect to the consumer. Instead of "talking down" to its intended audience, the ads attempted, in the words of Oakley, to "give the audience credit to understand a joke."

COMPETITION

According to Adweek, "even powerful jeans marketers are finding that snaring—and retaining—consumer loyalty is an increasingly slippery endeavor." With its traditional emphasis on Western wear, Wrangler had done quite well in building consumer allegiance to its products. By 1997 the company had seized 27 percent of the jeans market in the United States, selling 100 million pairs of jeans annually. One out of every five pairs of jeans sold in the United States each year carried the Wrangler logo. The company was well poised to remain in its leadership position in this area, though always mindful of other jeans giants such as Levi's and Lee.

When it entered the outdoors wear sector, however, Wrangler encountered a new group of competitors, all of whom were poised to capitalize on the rapidly increasing popularity of wilderness activities such as backpacking and fly fishing. L. L. Bean, the well-known outdoor clothing company, reached consumers through its catalogues that featured clothing such as waterproof jackets and flannel-lined jeans, and which had a broad appeal with more affluent customers. Bass Pro Shops represented another challenge for Wrangler's Rugged Wear, as did Cabela's.

In order to favorably distinguish Rugged Wear from its competitors, Martin sought to create a campaign that was memorable. Instead of relying on the generic outdoors-wear advertising tactic of portraying a forest tableau with a man in hunting pants holding a gun, Martin focused on a certain lightheartedness in the "Rugged Wear" campaign. The use of animals—the chameleon in camouflage attire and the pants-climbing cats—was meant to distinguish Wrangler from other companies' advertising efforts, as was the playful tone. By excluding actual people from the prints, the "Rugged Wear" campaign served to emphasize a connection with nature and the wilderness. In essence, Wrangler's ads, unlike those of its competitors, suggested that the clothes could take the consumer to the land of open sky, where the only "person" visible would be one's own silhouette cutting through an underbrush of briars. Moreover, the three component Rugged Wear print ads were not merely function-oriented presentations of the product line. Instead, the leather-stitched border and the burnt and branded look of the Wrangler logo in each ad served to convey more than the "nuts and bolts" of the products. Martin strove to give the Rugged Wear line an indelible image.

A MISUNDERSTOOD ATTEMPT AT DO-GOODING

In a preceding campaign for the Rugged Wear line, Wrangler marketed the outdoors clothes as being ecologically correct. Touting the use of biodegradable enzymes and eco-friendly dyes, Wrangler expected a positive response to its "Earth Wash" concept. The company's extensive research had revealed that half of Rugged Wear's target market expressed concerns about environmental issues. In stores, however, shoppers were not willing to manifest this zeal. Not only did customers dislike the softer colors that resulted from the use of biodegradable dyes, they also were wary that they were being charged more for "green" clothes. In response, Wrangler brightened the colors. But while it stopped emphasizing the environmental benefits of the apparel, it continued to use most of the eco-friendly manufacturing innovations in the Rugged Wear line.

MARKETING STRATEGY

Wrangler had already mastered niche marketing for its Western wear products, and it applied the same strategy in the "Rugged Wear" campaign. By using only print media, Wrangler was able to hone its message to reach the narrow target audience it desired. The ads appeared in magazines such as Field and Stream, Hunting, American Hunter, Outdoor Life, and Bassmaster. As the campaign's popularity became evident, Wrangler expanded its scope to include outdoor billboards. Once more, the company did not seek upscale urban consumers. Instead, it chose rural locations for the billboards. The posters were also enlarged to be used as "point of sale" ads, located in specialty stores where the Rugged Wear line was carried. Just as the company had sponsored rodeo events and riders, Wrangler attempted visibly to bring its message to its desired consumers. For this reason, Wrangler entered the growing sport of bass fishing in high profile by sponsoring the "Wrangler Anglers." This training program for amateur fishermen was a huge hit. "We realized that our consumers for outdoor products were grass-roots guys out there in the ranks of the Bass Anglers Sportsman Society Federation, and we wanted to do something to support them while introducing our products," a Wrangler public relations director told the Greensboro News and Record.

As part of its marketing tactics, Wrangler was careful to never completely sever the association of Rugged Wear with its popular and well-known Western clothes. The Western-style border and brand on each of the posters served to assert Rugged Wear's claim to the Wrangler heritage. Since the target markets for the two sectors showed some overlap, this strategy served to span the distance between Wrangler's broad Western wear consumer base and its outdoors sportspeople.

Indeed, this strategy conformed perfectly to an emerging trend in the Western wear category. According to the Daily News Record, Western wear shoppers began to seek out more "rugged, outdoors-inspired merchandise." Bill Koronis, vice-president and general manager of VF's Western wear discussed the shift with that newspaper. "Up until now we were selling [Rugged Wear] primarily to sporting goods and farm stores, but in the past couple of years, Western wear retailers have been looking for something else to sell to their consumer."

In order to capitalize on this shift more fully, Wrangler joined with traditional Western wear stores such as Sheplers to launch in-store shops for the Rugged Wear line. These shops displayed canoes, tents, and outdoor motifs to illustrate the underlying purpose of the Rugged Wear line. "If you just stick these items on a rack, they fail," said Koronis in the Daily News Record. "But if you make the investment in presentation, it's very successful."

OUTCOME

Banking on the bridge between Western wear and outdoors wear was a risk for Wrangler. "It was a big step for the company," said Martin copywriter Oakley about the "Rugged Wear" campaign. But the plunge served Wrangler well. On an anecdotal level, the campaign gained the admiration of consumers. Hunters and fishermen so liked the prints that they contacted the company and requested copies of the component ads to hang in their homes. Wrangler was so pleased with the response that it expanded the campaign into 1998. The "Rugged Wear" campaign was also lauded within the advertising industry. Most noteworthy was the Addy Award garnered by the "Chameleon" ad. The Rugged Wear campaign and product line were widely praised by publications as diverse as the conservative political paper the Washington Times and the industry-standard Advertising Age.

Despite slumps in its mainstay Western wear and discount markets, Wrangler continued to see steadily rising sales. A Wrangler executive told the Daily News Record that the Rugged Wear line was "showing good growth."

FURTHER READING

Casada, Jim. "Amateurs Fight Long Odds." Greensboro News and Record, August 2, 1995.

Krouse, Peter. "Jeans: Life's Little Labels." Greensboro News and Record, November 2, 1997.

Mundy, Alicia. "She Works for a Conventional Agency, But She Has a Decidedly Unconventional Approach to Media." Brandweek, December 8, 1997.

Palmieri, Jean. "The New and Improved Wrangler." Daily News Record, March 2, 1998.

Parpis, Eleftheria. "Searching for the Perfect Fit." Adweek, September 15, 1997.

                                                Rebecca Stanfel

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