While over half the increase in spending was behind The North Face® and Vans® brands, where brand investments doubled during the year, nearly every brand in our portfolio received additional marketing support in 2010. We also made significant investments to support our rapidly growing and highly profitable businesses in China.
Those investments paid off handsomely. In 2010 revenues rose 7% to $7.7 billion and gross margins reached an all-time high of 46.7%. Earnings per share were $6.46 (excluding a noncash impairment charge for goodwill and intangible assets), up 25% from 2009. During the year we generated $1 billion in cash from operations – another record—and our financial position is stronger than ever. We enter 2011 with great
momentum, confident in our brands’ ability to generate substantial growth,and well-positioned to deliver another year of outstanding results to our shareholders.
Extending the reach of our brands internationally is one of our core growth strategies, and in 2010 international revenues grew 8% in constant dollars. Asia is a tremendous growth market for our brands, and 2010 revenues in Asia grew by 31%. We now have four primary platforms established in Asia to support growth: jeanswear, primarily with our Lee® brand; outdoor with The North Face® brand; action sports with the Vans® brand; and handbags and accessories with the Kipling® brand. Each of these businesses is growing rapidly, giving us confidence in our ability to achieve our target of $1.3 billion in revenues from Asia within the next five years.
Another core growth strategy is expanding our direct-to-consumer businesses, through our brands’ retail stores and e-commerce. In 2010 our direct-to-consumer revenues grew by 13%. At year-end we had 786 stores across our portfolio of brands, and expect to open about 100 new stores in 2011.
With revenues rising 14% in 2010, our Outdoor & Action Sports businesses continue to fuel both our top and bottom lines. Our focus on expanding our Outdoor & Action Sports businesses, The North Face® and Vans® brands in particular, has resulted in exceptionally strong growth. In 2010 Outdoor & Action Sports accounted for 42% of total revenues, up from only 22% five years ago. By 2015, Outdoor & Action Sports should account for at least half of VF’s revenues.
Jeanswear coalition revenues were up slightly in 2010, with growth accelerating as the year progressed. The key brands in our Jeanswear coalition—Wrangler® and Lee®—are as strong as they have ever been. Our brands’ use of consumer research and new processes to drive innovation has greatly strengthened our product pipeline and is resulting in market share gains and positive momentum for both brands within their respective channels of distribution.
Revenues and margins of our Imagewear coalition, comprised of our Image (or uniform) and Licensed Sports Group businesses, rebounded strongly in 2010. While they serve different consumers, these businesses share outstanding service and inventory replenishment capabilities, providing them with a competitive advantage to expand their market shares.
Results of our Sportswear coalition, which consists of our Nautica® brand and our Kipling® business in the U.S., were stable in 2010. Through extensive consumer research conducted during the year, the Nautica® brand has clarified and strengthened its brand position, bringing to life its heritage as a brand that takes its inspiration from the water. This cohesive message has been activated globally across all facets of the business, including product design, marketing and e-commerce, within our stores and with our licensees.
Our Contemporary Brands coalition grew revenues by 5% in 2010, but soft market conditions in the premium denim market affected our 7 For All Mankind® brand, resulting in lower profitability for this coalition in 2010.
We’re excited about the opportunities that lie ahead. Strong platforms are in place to support our growth plans, as is a passionate and talented team that is committed to delivering superior results to our shareholders.
Over the past few years, we’ve significantly strengthened our portfolio of global lifestyle brands. The result is an opportunity for top-and-bottom line growth at rates beyond those we have previously envisioned. In short: over the next five years we aim to add $5 billion to revenues and $5 to earnings per share over 2010 levels. The VF of 2015 will be more innovative, more international, more diversified and more profitable. Success will be fueled by our six Growth Drivers:
We will continue to build powerful brands both globally and regionally. Our focus will be on activity-based brands that speak authentically to their consumers’ lifestyles, particularly in the outdoor and action sports categories.
Our goal is to generate 40% of revenues from international markets by 2015, with growth concentrated in Europe, China, India, Brazil and Mexico.
We need to be where our consumers are – both in-store and online. Growth in our retail stores and in e-commerce will provide more opportunities for our brands to tell their compelling stories directly to consumers. Our goal is to generate 22% of revenues through branded
retail stores and e-commerce by 2015, while increasing our focus on building stronger relationships with consumers through our brands’ websites and social media.
We have declared innovation as VF’s newest Growth Driver. Innovation, which we define as “something new that creates value,” will require every functional area across VF to think differently about how to enhance success. It’s also about going outside for new ideas in terms of what we provide to consumers and how we make, create and deliver it.
A crucial part of our success is to continue investing in our people through a variety of strategically aligned training and development opportunities. Another aspect of enabling our future is investing in supply chain capabilities that reduce cost and provide speed, flexibility and value.
At VF, we have a long history of creating successful retail partnerships, in part because of our extensive knowledge of consumer needs and global brand expertise. We’ll build on these capabilities to expand our market share and bring exclusive new brands to our top customers.
