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VF Corp. Will Boost Q4 Ad Spend 15-20%. What?

So inured are we to bad news that when VF Corp. CEO Eric Wiseman confirmed in the apparel company's third quarter earnings call that VF will increase advertising budgets 15 to 20 percent across the board, with more cash allocated to support product launches, we kinda freaked out. Eric Wiseman, what are you, nuts? Did you not get the memo?

Not only that, but:

  • Third-quarter revenues rose 6.4 percent to $2.2 billion. The North Face grew sales 15 percent, Vans 11 percent, high-end brands 12 percent as a group. including 7 for All Mankind and lucy.
  • Earnings were up 12.9 percent.
  • VF's direct-to-consumer business is vibrant and growing, up 12 percent from the year-ago quarter and representing 14 percent of sales. VF will open 90 stores in 2008, featuring brands such as Napapijri, John Varvatos, The North Face, lucy and Lee.
VF can pull this off because its portfolio is enormous: 30 brands that cut across categories, demographics, retail channels, and geographies. If a shopper decides that 7 for All Mankind jeans are unaffordable at $185 at Nordstrom, she can head for Kohl's for a pair of Lee jeans at $24.99, or the nearest Wal-Mart for Wranglers, all without leaving the VF family of brands.

For the record, Wiseman understands that times are terrible. Investment news services dutifully reported that VF Corp. warned that its fourth quarter would not meet earlier forecasts, "tempering our outlook," as Wiseman said. And the analysts on VF's earnings call made it clear that a share buyback, rather than increased ad spend, would suit them better.

But Wiseman was undeterred.

On the increase in advertising spending, we have been adamant all year that we have a long-term plan to build our brands around the world and that implies with it investment in brand development and investment in product development. We have encouraged if not insisted that each of our coalitions not back off on those investments where they're making progress. I think that's smart for us long term. I think it's the right thing to do.

I think in this environment if you have good marketing and advertising, it's a great time to show it. If you believe consumers are going to be much more selective in the choices they make when they're spending, I'd rather have the best products supported by great brands that they're seeing in the media on a regular basis with compelling advertising. I just think that's the right thing to do and we can afford to do that and will continue it.

Look for VF to take advantage of other companies' misfortune, snapping up brands out of bankruptcy, taking share as competitors disappear, and locking in great deals on shopping center real estate.

"That would be our wish," Wiseman said.

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