Vans Parent Company VF Will Acquire Sports Shoes Brand Skechers

After about two years of restructuring, Vans VF, the parent company, seems to be interested in Skechers, an American shoe brand that has become more and more eye-catching in recent years.

It is understood that Wei Fu group or $40 a share, a total of about $5 billion 600 million price acquisition sports shoes brand Skechers.

The two sides have begun negotiations, but some agreements have not reached a consensus and become deadlocked.

So far, neither the group nor Skechers has responded to the news.

Skechers was founded in 1992 in California, USA. Its main products include men's, ladies' boots, sandals, casual shoes and sports shoes.

Thanks to the concept of comfort and supremacy pursued by Skechers for many years, the brand has become the second largest footwear brand in the United States after Nike, and has won the title of "best brand of the year" for three consecutive years.

According to TNS released by research firm, the popularity of Skechers in sports brands reached 38% in 2017, compared with 24% in 2016.

The US professional footwear magazine "FootwearNews" predicts that Skechers footwear and apparel products have good growth potential, and that growth will not be less than 12% in the first half of 2018.

Through the improvement of distribution network, the establishment of branch offices and the establishment of joint ventures, Skechers has begun to penetrate into the global sportswear field in recent years. At present, the overseas market has become a new engine of growth.

It is understood that in the third quarter of last year, Skechers sales increased by 7.5% to 1 billion 176 million US dollars, once again a record breaking growth, and profit fell slightly to 90 million 700 thousand US dollars.

During the period, wholesale sales increased by 11.8%, retail business grew by 10.6%, and brand sales in the US dropped by 3%, including China's international business growth of 12.5%.

In the first three quarters of 2018, Skechers sales increased by 11.5% to $3 billion 560 million, which also set a new record in history.

At the same time, the Vans group, which is the main driving force for growth, began to feel the pressure of the market shock. Since 2017, it has been carrying out brand strategy reorganization to optimize the group's performance and gradually shift its focus to outdoor sports business.

In the first quarter of 2018, the Group acquired the New Zealand outdoor brand Icebreaker, and then sold its shoe brand Reef to the shoe manufacturer RockportGroup in October.

In December last year, the group decisively decided to spin off the cowboy Department belonging to Wrangler and Lee brands, such as KontoorBrandsInc., to an independent company, which will soon be completed in the first half of this year.

It is understood that, in the three months ending September, the income of Wei Fu Group rose 6% to 3 billion 907 million US dollars compared with the same period last year, and net profit rose 14% to 576 million dollars. During the period, only two brands of Vans and TheNorthFace grew by 26% and 5% respectively, while the income of three brands of Timberland, Wrangler and Lee were hit by Sears bankruptcy, 2%, 5% and 5% respectively.

During the period, the group's sales in the United States increased by 17%, and sales in the Asia Pacific region increased by 15%, of which China's sales rose 21%, and sales in the Americas apart from the United States increased by 19%.

SteveRendle, chairman and chief executive, stressed at the conference call after the earnings announcement that the group is at a critical stage of pformation.

SteveRendle said that although the explosive growth of Vans continued to a certain extent, it had a positive impact on the performance of TheNorthFace and Timberland brands.

But after nearly 6 years of rapid growth, Vans will face new challenges.

As for outdoor sports brands such as TheNorthFace and Timberland, SteveRendle says that there is still a long way to go before the performance is restored to its original level.

So he admitted earlier that the group is currently actively optimizing its brand portfolio and will continue to look for suitable takeover targets.

According to SteveRendle, the group has strict standards for acquiring objects, because it is not just a new brand. What the group most values is whether the brand can consolidate the relationship between the group and consumers, followed by the digital development potential of the buyers, and whether the brand can become the engine of growth of the group.

It is worth noting that the Group signed a 10 year lease with the AxtellSoho building in central London, England, last December. As its European headquarters and business center, it will be finished and put into use by the end of next spring.

For the second half of the 2019 fiscal year, the group is still confident about the development of Vans. It is expected that the brand's annual revenue growth will reach 18% to 19%. However, the low performance of the European market will have a negative impact on Timberland and Vans.

In view of the current market value of more than 28 billion 500 million dollars, the analysts believe that the group has the ability to complete this profitable paction, the two products are very consistent with the positioning.

MichaelBinetti, an analyst at Credit Suisse, said the acquisition had greater financial significance, which would make Skechers valuations up to 10 times the profit before interest tax depreciation and amortization in 2019.

After the news, the group's shares rose 1.7% to 73.16 dollars, while Skechers shares rose 6% to 26.86 dollars, and the market value is currently about 4 billion 250 million dollars.