The global outdoor apparel market is a $12 billion
industry. For more than a half century the north face has
competed in this space outfitting mountain climbers and
skiers. But the outdoor recreation brand is now hoping
to become a big player in the 180 $5 billion streetwear market
as well. It is also benefited from a renewed interest in the
outdoors.
There's certainly a return to outdoor. There's the focus on
health and wellness. There's a commitment to sustainability and
consumers are looking to connect with brands that that speak to
those particular trends.
And when we talk about sports, whether it's outdoors or
athletic sports, you know, the brands are all focused on
presenting a true athlete in wearing their products. But the
money is in sports where the money is in people in the
suburbs, who were wearing it to drive in the you know, the SUV
to the craft beer bar.
In the three months ending September 2021, The North Face
had revenue of $883,000,000.30 1% higher than a
year earlier. And while interesting outdoor activities
like camping have surge, climate change and consumer trends like
sustainability have led to a range of challenges and
opportunities for the brand. Every year 85% of textiles
produced including clothing, shoes and gear ends up in
landfills. The company also faces stiff competition in a
crowded outdoor apparel space. So how was the North Face
pivoting in its battle with rival Patagonia and why did the
outdoor apparel and equipment company transition from focusing
on climbing gear to street wear. The Northeast got its start in
San Francisco in the 1960s, selling backpacks, tents and
sleeping bags to climbers. On opening night, a pair of Hells
Angels provided security at the door while the Grateful Dead
performed to beat next from the neighborhood. Have clop a recent
graduate of Stanford MBA program bought the business in 1968 with
the idea of infusing tech into the camping experience. Using
material from the Vietnam War, the company designed sleeping
bags and tents out of nylon parachutes, and pack frames and
tent poles. And I've used aircraft aluminum
was the 60s. And there was all the urban problems. There's anti
Vietnam war effort in Berkeley, we were at the center of all of
that. But what we knew what I knew was that if people went
into the wilderness, they're going to come back renewed
refreshed and they'd have a better view but being stewards
of the earth and how they could move forward.
During the 60s, the Northeast launch sponsored expeditions
around the globe in in 1975 introduced its geodesic dome
tent, a design that set the standard for tents used at high
altitude in our polar expeditions.
And that was a big breakthrough in terms of what we did and
frankly, it ended up selling very well. But probably not for
all of the design reasons we talked about the the Bucky isms
that we had, which were you know more space with less materials,
but it looked good. It looked unique. It set up very well in
stores.
By the early 80s. The Northeast added extreme ski were initially
making windproof jackets for freestyle skiers and by the 90s
at a trail running and tracking shoes. The company was also
pushing further into street wear, and in 1992 introduced the
Nuptse. The iconic puffy jacket along with other coats like the
Himalayan down jacket created a massive following among everyone
from hikers and rappers to prep school kids.
At the outset, we made no clothing and now clothing is
probably 80% of what they sell can the
case with North Face they've also really embraced the whole
streetwear vibe and are creating really limited edition products
collaborations with music artists and celebrities to to
bring their product to to a more of a streetwear side of the
consumer which is really built based on scarcity, very limited
quantities very limited availability, often garnering
high prices in the resale market.
In decades before the rise of social media companies. The
Northeast was adding influencers to its roster, including Ned
Gillette, who wrote from the tip of South America to an article
in 1988. But a series of missteps was causing mounting
headwinds for the company higher costs in the late 1980s due to
poor product sourcing and a failed retail expansion strategy
that focus on outlet stores so the company's financial
performance deteriorate. By April 2000, the North Bay stock
price closed at $1.22 in the company acknowledged substantial
doubt about its ability to continue as a going concern. In
2020, the North Face was sold to apparel and footwear
conglomerate VF Corp for roughly $25 million as a 2022. The North
base owned and operated stores in more than 40 countries. The
outdoor apparel market is a $12 billion business and includes
companies like the North Face Rei, Columbia, sportswear,
Marmot and Patagonia. according to analysts in recent years
years outdoor apparel has been impacted by events ranging from
a decline in travel, fewer people go into work to the
ongoing climate crisis. changing consumer priorities have also
caused some headwinds. One of
the other interesting fashion trends we've seen is that young
people are just buying sweatshirts, and some layering
up if it gets cold, they'll put two or three sweatshirts on and
that's their outerwear instead of going out and spending a lot
of money on a jacket.
But despite those disruptions, an increase in outdoor
activities has led to big gains for the outdoor apparel segment.
In the nine months ending September 30 2021, Columbia
Sportswear its net sales increased almost 26% to $1.9
billion.
At the end of the day, the fundamentals of the business are
spectacular. People want to go outdoors, it's the best place to
be active with your family. It's the safest place and consumers
are definitely taking advantage of that.
The North Face saw even bigger gains in the three months ending
September 2021. It had global revenue of $883,000,000.30 1%
higher than a year earlier. In fiscal year 2021. The Northeast
accounted for 26.6% of revenue at VF. Other brands including
vans made up 37.5% of sales. Timberland made up 16% and work
apparel brand Dickies made up 7.5% divisions including Eastpak
Jansport, Eagle Creek, a clothing and skateboarding
lifestyle brand supreme made up the remainder. according to
analysts, one way the north face has been able to differentiate
itself from the pack is by collaborating with fashion and
streetwear brands like Gucci and supreme.
You know, they have innovation, they push the boundaries of
design with these companies in ways they would have never done
by themselves. So they make a lot of really smart choices
about who they collaborate with and why and what demographic
that's going to bring to them. And that's fundamental and what
the why the north face is so successful.
Perhaps the largest player in the outdoor apparel space is
Patagonia. Patagonia, the private Southern California
company, known for its trendy jackets and fleeces got its
start in 1973 as a rock climbing outfitter that later sold rugby
shirts. The company's long term focus on environmental activism
has attracted everyone from outdoor gear aficionados to
suburban moms.
Patagonia was never really focused on the extreme athlete,
they were focused on much more of a recreational outdoorsman
and always had a strong strong grounding in, in sustainability
in protecting the environment. And I think that's one of the
thing that propelled Patagonia to where it is, is their their
very strong and vocal stance on on the environment
since 1985. Patagonia has pledged 1% of its sales to the
preservation and restoration of the environment. By 1996. All of
its cotton products were made organically and it has to use
clothing and repair program for its garments. It is also taking
steps to improve its supply chain. Consider one of the
world's lowest paying jobs. There are about 60 million
apparel workers globally. Well, Patagonia doesn't own any of its
own factories. In 2013, the company partner with Fair Trade
USA in an effort to find a permanent solution to ensure all
the workers earn a living wage, as of 2019 35% of Patagonia's 31
apparel factories are paying their workers a living wage on
average. Well, Patagonia has leaned into sustainability. The
Northeast has historically turned to its roster of over 90
sponsored athletes to raise brand awareness Basu. So Geeta
is one of those athletes. At nine months old, he lost his
right leg to a blood infection. Today, the extreme skier has
somebody and backcountry ski on some of the tallest us peaks.
I mean, I do love skiing, but I try to not generalize too much.
I guess I'm more of just like a mountain athlete. As much as
possible. I like being in the hills, like being close to the
mountains in any way, shape, or form. In the summers, I tend to
go on trail runs or go on the river and go camping and
whatever. And then in his winters, enjoy skiing and ski
touring and hanging out with my friends and enjoying that as
well.
Foster's role at the North Face ranges from testing gear to
being a face for the brand storytelling in marketing
campaigns and on social media.
They're they're sponsoring these athletes to go out into the
world and to do activewear outside. They're taking
photographs, they're documenting this, they're seeing what rips,
they're seeing whose zipper breaks, and they're testing the
materials in real life. And then they're documenting it and
people want a piece of that and it's very authentically North
Face.
I think the other side of that is more of the emotional side is
that we know we're successful we tell human stories of our
athletes and what they're able to achieve in
2020 fosu climb in skied Wyoming's Mountain Moran. The
feat was documented in a video short by the North Face. The
following year, he paired up with Pete McAfee to become one
of the first adaptive athletes to climb Alaska's 20,000 foot
Denali mountain and descend on skis.
It's kind of a little bit of a test of every piece of, you
know, knowledge I've acquired over the years around
backcountry skiing, put into one month of just you know, kind of
arduous suffering on the mountain so and making good
decisions on the meantime as well.
Driven by a growing middle class, global clothing
production has roughly doubled in the 15 years between 2020 15.
During that same period, more than $500 billion in value was
lost annually. Due to clothing, underutilization and lack of our
cycling, consumers have taken notice. According to a 2019
study, two thirds of consumers said they were willing to pay
more for sustainable goods. 42% of millennials want to know what
goes into their product. And 90% of Gen Z consumers say companies
have a responsibility to address social and environmental issues.
But I
think every brand frankly has to face into this today. The
consumers are telling us very clearly that they will want to
spend their money with the brands that share their values,
and their effect demanding that brands tell them what their
values are, what they stand for, and what they don't stand for.
And if those don't align with the younger consumer, they're
going to take their business elsewhere. Like its
rival, Patagonia, the North base has been scaling up
sustainability across all its operations.
They don't just want a brand that sells a product, they want
a brand that is doing things that are good for the world good
for the environment, good for the population that lives on our
planet.
One of the company's largest product lines Thermoball jackets
is made using 100% recycled fabrics and insulation. In 2018.
The Northeast launch its renewed collection, offering refurbished
products for consumers seeking access to affordable gear while
minimizing their environmental impacts. And it encouraged
people to drop off unwanted clothing by offering a $10 store
credit. Since its start, more than 95,000 pounds of clothing
and footwear have been kept out of landfills. And the company is
weighted into politics to becoming the first large brand
to join stop the hate for profit, a temporary boycott of
Facebook advertising. The campaign is calling on the
social media giant to address the surveillance of hate racism
and misinformation on its platform.
I don't know how successful those initiatives will be. But I
do think that companies that participate even in that
conversation are really endearing themselves to a
younger group of of consumers who want that and seek that. And
by that,
and in addition to those initiatives, ala se would could
propel the North Face forward in the years to come is the
strength of its brand is a journey at diversifying its
product line in a renewed interest in the great outdoors.
The money is in sportswear and yes they want to present an
authentic, credible view that they are true to their origins.
But it's much more about getting product on the high school kids
facts and getting them to wear your products and then it is
about actually putting the products through extreme
conditions.