Ladies and gentlemen, Chairman, President, and Chief Executive Officer, Eric Wiseman.
Good morning, everyone. Thank you for being with us this morning. Some of you have been following VF for a long time. I can see by the technology moving in the room that some of you are already beginning today's coverage of VF. We have a long story to tell here today, and we're pretty excited about what's happened to our company over the last five to 10 years. As many of you know, we've changed VF in a lot of ways over the last five to 10 years. Today our company is much stronger and much more capable than we were when we began our transformation. At VF, we're both very proud of our past, more importantly, we're very excited about our future. We believe we're just beginning to achieve the potential that we have to grow and to deliver shareholder value.
We've talked a lot about where we've been over the last few years, today we're going to share with you some of our plans and priorities for the next five years. We're as confident of achieving our plans as we've ever been. If you look back, the best place for me to start is looking back at where we were in beginning of 2011, as Lance mentioned, when we announced some five-year plans to you. What we said at that time, very simply, was we were going to grow our company by $5 billion and add $5 in earnings per share by 2015. Greatly helped by the acquisition of Timberland, we've made substantial progress in the first two years of that five-year period. You can see on this chart, we're well ahead of the game everywhere that we should be.
Our revenue, again, greatly helped by the acquisition of Timberland and Smartwool, is two-thirds of the way to our planned target. We've made great progress in gross margins, again, ahead of plan. Our operating margin, also ahead of plan, as you know, Timberland and Smartwool have been a slight drag on our operating margin rate. Where they've also helped us, though, is in our earnings per share, where we're also at about two-thirds of our target at $9.63. As I think forward to that, to the guidance that we shared in April of this year, it gives you another look at how much progress we'll make based on this guidance in 2013. Most importantly, on the earnings per share line, achieving most of our target by the end of this year, which is why we're here today.
We're here today to help you understand what we're committed to achieving in the next five years and how we're going to get that done. We have a whole bunch of our leadership team here today to take you through where we're going to grow, how we're going to grow, and how we're going to enable that and achieve it. When I think of VF Corporation, I really think about two things. I think about powerful brands and powerful platforms. Those powerful brands and platforms are so effectively managed by our leadership team that it's enabled consistent growth over time. The powerful brands are the foundation of our business. We have brands that have really strong equity with consumers, and most importantly, have strong operating models. Those operating models let us invest in each brand to achieve growth, while at the same time delivering superior shareholder returns.
Our corporation is covered with brands. We have a really diverse portfolio of brands. Our business model empowers brand teams to focus on their brand to deliver operating performance, while at the same time letting us leverage our size to drive efficiency and profitability. Our brands speak to a diverse set of consumers. We try to speak to them wherever they live, however they live their lifestyle, and wherever they shop. We think our diversity is maybe our single biggest strength. If you think about how personal the shopping experience has become. If you want to be relevant to a skateboarder, a 20-year-old skateboarder living in Orange County, you better show up in an authentic way, or they'll dismiss you.
If you want to speak to somebody living a Western lifestyle, a 20-year-old living a Western lifestyle in Montana, you better show up in an authentic way or they'll dismiss you. The diversity of our brands lets us do that consistently, the effectiveness of our operating model lets us do that in a way that drives superior shareholder value consistently over time. Today, we're going to focus on seven of our largest brands. Our leaders will come up and share with you how each of those, our seven biggest brands, are going to enable their future. One of the things that goes across all of our brands is the importance of innovation at our company. For us, innovation is about creating new opportunities for growth.
We define innovation as something new that creates value. Our objective in being innovative is to shape the future of footwear and apparel. Over the next five years, our innovation platform is going to be much more important to us as we drive revenue growth, enhance our margins, and strengthen our brands' connectivity with consumers. What we talk about is from the mass channel to the mountain top, we have to innovate. What we've learned in our third year of our innovation platform is innovation is just as important to our mass channel Jeanswear business as it is to The North Face. Also, we innovate in how we run our businesses. Whether we're innovative in robotics in a factory or robotics in a distribution center, or whether we're staying out in front of the digital and social space, we know we have to stay innovative.
Of course, in our products, we have to always give consumers reasons to believe in, trust, and buy our brands. Innovation only matters, by matters, I mean create shareholder value, if we connect it to consumers. We take a holistic approach in our innovation strategy. We think about our relationships with consumers, connecting across their lifestyles and their aspirations and their passion for products. Our consumer insights group uses both qualitative and quantitative data to shape product and brand strategies with the ultimate objective to drive loyalty from consumers and deeper brand equity connectivity. In every brand and in every geography that we do business, we try to combine the art of product design with the science of consumer insights to make sure we connect with consumers, always keeping them at the center of everything we do. You're going to see this X a lot today.
We're going to shape a lot of today's presentation about how we create shareholder value and how we win, and we're going to focus on four of V.F.'s growth drivers. I'm going to lay all four of them out for you now, and you'll see them in many of the brand presentations that you're about to see. The first is we lead in innovation, and to us, that means a constant stream of new and better products, new and better store environments, new and better digital experiences that deliver what our consumers want. Second, we connect with consumers, and we connect with consumers because we understand them. We believe that we invest more in developing and refining consumer insights and that we invest it better than anybody else in the industry.
We have an extraordinarily robust consumer insight practice at our corporate headquarters in each of our brands and in each of our geographies that's connected to build terrific brand strategies that work with consumers with our products in each market. The third plank, we serve our consumers wherever and however they want to engage with our brands. To us, this used to be a direct-to-consumer vocabulary. It's about serving consumers. It's recognizing that they are completely in charge of their relationship with our brands. We want to make sure that we're effective as we do that in our stores, through e-commerce, at our partners' stores, and through social media. We need to make sure that they understand what our brands are doing and that they appreciate how authentic our brands are. The fourth growth driver for us is expanding geographically.
We have a lot of potential left, a lot of growth potential left in the more mature U.S. and European markets, and we have abundant opportunity in emerging markets around the world. Over the next five years, our international business will almost double again. As a percentage of our revenues, it'll continue to climb. The one thing that enables all this is our powerful platforms. Our powerful platforms around the world have consistently demonstrated they can enable the growth and financial success of every brand we own and every brand we acquire. It's hard to find an example of a place where we have not been able to change the trajectory of a brand based on our global platforms. It's a critical thing to our future. Our brands capitalize on these by understanding the power that they deliver to the brands.
In addition to physical platforms, we also have capability platforms that are critical to our success. Today, you're going to hear from Stephen Dull, who's going to speak to our front-end disciplines around strategy, consumer insight, innovation, and brand management, and how, importantly, we share best practices of our brands around the world. Mike Gannaway is going to join us up here today, and he's going to talk about our direct-to-consumer business, how that is so important to our growth, our opening of stores and building e-com connections with consumers, and how we share practices at that on a global basis. Tom Glaser is going to come up and talk about our supply chain, and you'll see that it is complicated, and you'll see that we execute it very well. It's one of our critical enablers of our success.
Quite frankly, some of us were concerned when we were a $5 billion company if we'd be able to execute as well when we were an $11 billion company. That has been asked and answered. We are actually working more effectively now as an $11 billion company through our supply chain than we were when we were a $5 billion company. This afternoon, I'm going to have a bunch of our international leaders join me on stage, and we're going to talk about the business in each of the geographies and the importance of international growth to our future. Before I have all those leaders come up, before we get with the agenda, I know many of you. That's not true.
All of you have been looking through the books, I will officially unveil kind of what the next five years are going to look like to you right now, and it's all about growth. In 2017, V.F. will be a $17 billion company. As I said earlier, we're confident that we can grow our business at 10% a year. We think 8% of that will come organically and 2% by acquisition. Why are we so confident? In January of 2008, we laid out a five-year plan for you that we met. In spring of 2011, we laid out a five-year plan for you that we're exceeding at such a big rate, we have to have this meeting two years later and talk about what the next five years looks like. We're confident we can get to the $17 billion.
Over that time period, our gross margin will expand by 300 basis points to 49.5%. Over that time period, our operating margin will expand by 250 basis points to 16%. We know for us to achieve some of our growth rate, we need to invest more in our brands. At the end of the day, Bob Shearer will lay out for you what the shape of that will look like. We're going to invest some of our gross margin growth rate expansion back into our brand so that we can deliver a $17 billion V.F. in 2017. Our earnings per share will be $18 in 2017. It'll grow at a compound annual growth rate of 13%. We could have made it 17. We had in 2017, $17 billion in revenue and $17 per share. We just couldn't help ourselves. 18 is going to be the number.
That's where we'll be in 2017. We're going to generate abundant cash flow over this period. Over the five-year period, $9.5 billion of operating cash flow will come to us. We're about $1.3 billion last year. We think we'll be at about $2.4 billion in annual operating cash flow by 2017. We're really excited about this story. A lot of you, as I said, have been following V.F. for a long time. Almost everybody you're going to hear from today at V.F. was part of the company back in 2004 and 2005, when we were a $5 billion company and aspired to be an $8 billion company, then aspired to be an $11 billion company, and we've accomplished all that. Here we are today talking about a commitment to being a $17 billion company in 2017. To understand that, you need to understand the pieces.
The first piece of that, and an important piece of it, is our Outdoor and Action Sports businesses globally. To talk to you about that, it is my pleasure to introduce the Group President of our Outdoor and Action Sports businesses in the Americas, and that is Steve Rendle. Steve, you're up.
Thank you all very much. Good morning, everybody. How are you? I have noticed there is a lot of BlackBerry and iPhone activity going on. Guys, I'm going to take about a day's worth of content, and I'm going to try to cram it into 30 minutes. This is a very important part of V.F.'s overall business. Some very exciting brands. Outdoor and Action Sports is a very rich and diverse portfolio of 11 unique brands. Diverse from the activities that we participate in, from outdoor to action sports to performance and travel. Diverse when you think about the categories of product, apparel, equipment, footwear, and accessories. Diverse in that we're in every region of the world that V.F. does business. Over the past few years, we've seen significant growth, both organically, but also through the acquisition of Timberland and Smartwool.
Over that period of time, we've grown to be 54% of V.F.'s total revenue. As you project over the future, we'll achieve sales of $11 billion, which if you stop and think about it, that's equal to what V.F. was in 2012 in total. As we achieve that target, growing organically from an 11% standpoint, 3% through acquisition, we'll be 64% of V.F.'s total revenue. You might ask, why do we think we can achieve that? I would tell you, first, it's the powerful brand portfolio that we have and the people that run these businesses. If you think historically, our most prior five-year organic growth rate for this portfolio was 12%. Over the past three years, we've grown at a compounded growth rate of 15%. We've shown that we can do it.
We have the expertise, we certainly have the powerful brands. This growth will come from each of our global regions, each growing at double-digit rates. We're often asked the question about our individual brand growth opportunities. I would tell you this. We're fairly immature in each of the regions that we do business with, there's a tremendous amount of headroom for us to grow in these years to come. All the brands in our outdoor portfolio will be integral to us achieving our $11 billion target. Today, I'd like to focus on three. These are powerful brands with very proven teams and are proven leaders in their individual sectors. In 2012, these three brands made up 45% of V.F.'s total revenue. By 2017, they'll make up 52% of the total sales.
When you think of that versus some of the larger activity lifestyle brands or athletic brands in this space, these brands are very under-penetrated in a lot of the markets across the world, we have just great headroom to grow. If you think also about the market share, we're asked often about our share. What is our current share? What is our opportunity to grow share? I understand why that question's relevant, but actually, I think there's two sides to the story. At first, I'll give you some context to our share. It's a fair question. If you think about The North Face, at $1.9 billion in 2012, we had an 8% share of the global marketplace. Yet, The North Face doesn't just operate in the outdoor business. It's in the action sports and performance business.
If you add that market revenue to the opportunity, that's a $74 billion market opportunity. Case of Vans, we were at $1.5 billion last year. We had a 5% share of a finite market, this brand too plays much broader than just in the action sports space. Timberland. Well, there were just 2% of only footwear, we'll be talking to you today about an exciting apparel opportunity that we have with this brand. The second side of the story is market share is always talking about a finite or a static pie. If you think about the markets that these brands play in, these are very dynamic, growing global markets where consumers are entering on a constant basis.
In fact, our brands and our marketing efforts are about attracting new consumers to these spaces for us to get passionately engaged with the activities that we're all excited about building products for. As Eric mentioned, you're going to see the X a lot. The X to us has a center point. Over the history of these brands, but even more so in the last four or five years, as we've developed our consumer information team. The consumer is at the center of every decision we make, we've spent a tremendous amount of time and resources investing in global consumer segmentation studies for these three brands. These three brands' information, it actually informs our entire portfolio.
These investments help us and really guide the decisions we make around product, around marketing, around our in-store merchandising, understanding really how our consumers want to be spoken to, but also our digital strategies. As we also think across our ability to leverage this knowledge geographically, we tap into the powerful regional platforms that we have in Europe and Asia to help these brands scale in each region of the world. Let's get into some of the business. Last time I stood in front of you, we talked about a $3 billion The North Face by 2015. The North Face remains the leader in the outdoor industry, and we are as confident as ever of this brand's potential. Over the next five years, we see this brand growing at a 12% compound annual growth rate, achieving $3.3 billion in sales by 2017.
As you think about that 12% compound annual growth rate, we look at even double-digit growth across each of our regions. Back to that comment I had about growing the pie. If you look at that Asia-Pacific business, we're very young in the Asia market, and we're in a very unique position, an enviable position of being able to start an outdoor conversation with the young consumer in China about what it means to get outdoors. Just a tremendous amount of opportunity and headroom ahead for us in that region. We know our target consumer participates in a variety of activities. Activities from running to skiing to hiking and climbing. We know through our research that our consumers look to us for unrivaled performance and superior protection when they're out performing these activities.
The activity-based model that you've heard us talk about quite a bit over the years really is that platform that provides us an authentic, scalable means of reaching or really bringing our brands to our core consumers' new activities, but also attracting new consumers to these activities. We're the number one outdoor brand in the world, with particular strengths in apparel, in equipment, in footwear, as well as accessories. We're the number one apparel brand in ski specialty. The ski market or the action sports market for us is a unique place for us to speak to a younger consumer. We're really excited about our recent agreement to sponsor the U.S. Freeskiing team, first coming out in the Sochi Olympic. New activities will be coming to the international arena around skiing, and we will be representing the U.S. Freeskiing team as their uniform supplier.
This will be the first time that a The North Face brand has been able to participate and be seen on such a large global stage through just the massive media that these particular activities will be getting. Our performance business, new to the brand, is our fastest-growing category. Over the last three years, we've seen this business grow at a compound annual growth rate of 24%. The piece of the business inside of here, the training business, which is such an important business to consumers today, has grown at a 44% compound annual growth rate. We're getting great placement here in the U.S., in Europe, and just beginning in some of our Asia markets. At the center of all this is our innovation platform.
Innovation to The North Face is about solving problems or bringing solutions to problems that our athletes and our consumers bring to us every day. We've made significant investments over the last few years in our advanced products and materials research teams who really are helping us dive deep into understanding what superior protection is and what it means to bring products that protect consumers from the elements. We're focusing our attention specifically around motion control, moisture management. Last year, many of you saw the introduction of our new FlashDry technology that's now involved in a number of products, not just from sportswear, but to outer layers, and it's moving into footwear, and temperature control. Temperature control certainly is what The North Face has made its living on.
We have a unique understanding now through our research that for consumers to remain comfortable, and that's for you and I not to feel hot, not to feel cold, we need to help our consumers keep a skin temperature of 91 degrees Fahrenheit. Our research teams are very focused on technologies that would do that, from base layers to mid layers to outer layers. In Fall 2013, for those of you that joined us at the trade show, our new ThermoBall technology, which is part of the Science of Warmth platform. ThermoBall is a polyester synthetic fiber that's been constructed to mimic the structure of down. 600 fill power would be the comparable warmth, but it doesn't have the inherent negatives of losing warmth when getting wet. This is just the first of many new products coming out of this platform.
I think it's probably safe to say, and it's something we really pride ourselves in and we're investing hard is, that there is nobody in our space that will be able to out-innovate us. When you think about the consumer insights that we have, the understanding from our athletes, and the information we receive from our consumers, but also the investments that a brand like The North Face is able to leverage from V.F. to scale this platform and do research that many of our competitors just have no opportunity to be able to do. Another area of innovation and a great white space for this brand is footwear. Our research tells us that the outdoor activities are trending faster, that mobility and performance are becoming very, very important, yet consumers want to maintain protection.
If you look at the current outdoor landscape of footwear, it's either big and bulky and very protective, or it's lighter weight, more performance with very little protection. There's an opportunity for The North Face to capitalize on our brand points of difference, performance, superior performance, and protection. Through that, we're launching a new footwear collection in Spring 2014 under the name of our Ultra Protection Series. This is a series of products, a single collection that will span from hiking to multi-sport to trail running and training. It will really provide the perfect balance of lightweight performance and superior protection, layering in a number of new technologies, layering in some of the old technologies, but being able to focus on moisture management, motion control, but also impact control when we think about lighter weight footwear in the outdoor spaces.
The North Face has stories like no other brand in this space. Rich content generated by our athletes and proven out through our expeditions. Our focus is really about increasing brand awareness and leveraging our tagline of Never Stop Exploring. Our brand campaigns are about building emotional connections that really draw our consumers in to understanding the essence of our athletes and the expeditions. We then take that emotional connection as we get closer into that point of sale where we're helping drive traffic and helping convert consumers at retail through our series campaigns, where we're distorting our athletes. We're talking more specifically about our products. Our vision is to create great content and distribute it where we know our consumers are living their lives. We speak to them directly through TV. We have a new global TV campaign for the first time that'll be launching this fall.
Print campaigns, videos, online messaging are the ways that we can have a one-way conversation. More important today are the two-way conversations that we're able to have with our consumers and engage them directly through social media. D2C is a very important part of this brand, and over the next five years, will grow from 20% of our total revenues to 27%, with doors nearly doubling. Our sales will increase 18%, with e-commerce growing faster than brick and mortar. I started this conversation by saying just how immature our brands are in a lot of the global markets, and Europe is no different from a The North Face standpoint. This is a large outdoor marketplace. Snow sports in Europe is twice the size as the market here in the United States.
This is a great opportunity for our brand to build awareness and really drive off the strength that we have in the U.K. We're focusing aggressively today about building our brand in Germany, Austria, Switzerland, and really seeding our brand in France, Italy, and Russia. Driving growth aggressively in each of these markets. You think about Asia, and many of you participated in our meetings last year in Asia. We have an opportunity, a very unique opportunity to build a new category and most importantly, new consumer. You've heard, we have a very deep understanding of this consumer. We have a good understanding of this market through our local market teams, and we have a very strong understanding of our competitive set. We will leverage our position as that number one outdoor brand to become the undisputed leader in this important outdoor market.
Vans, just a phenomenal growth story for V.F. A year ago, we laid out our 2016 plan, and with one year under our belt and the knowledge that this brand is performing extremely well, we're raising our target to $2.9 billion by 2017, growing at a compounded growth rate of 15%. I know Bob and Lance have talked throughout the first half of this year, but I think it's important to re-emphasize this. Vans is now our second largest brand in Europe, and it is V.F.'s second largest brand on a global basis. Great growth and a tremendous amount of opportunity yet ahead. We'll see our regional growth rates are virtually unchanged. Each region growing at a strong double-digit rate. We talked about this last year. I think it's important because this is a very unique methodology that this brand has used to scale itself.
The center of gravity for the action sports and for Vans, as many of you know, is California. Over the years, Vans has been able to grow its influence up and down the West Coast into the Rocky Mountains. In around 2004, shortly after the acquisition of V.F., we turned our focus west, and we began to grow across the southern tier to the Southwest and into Florida. In 2010, we turned our focus north, and we talked a lot about our strategy that brought the brand to life here in the New York market. It's that unique strategy that's enabling us to grow awareness, grow equity, and build on our revenue. Just important parts, this brand has a very unique set of activities and events that it's able to leverage and really draw our consumers in with. We will enter a market.
We focus with partnership store. We build out a very unique and authentic brand retail environment that with that partner, we're able to attract that core consumer and really build our relevance. We focus with our own stores. In the case of New York, we ringed this market with our stores. As we did that, the awareness grew, and our wholesale business with our key partners grew. It's that strategy that as we think to the future, we're now heading into Boston, we're doubling back down to Atlanta, and we'll be turning our sights west, deploying this same strategy. In Europe, we talked, it's the same strategy.
U.K. is our epicenter or our center of gravity for the business there, we're really deploying the same tactics, building awareness through events, focusing with core skate retailers to really deliver that authenticity, then looking to scale with our own stores, building awareness, and focusing on key accounts. As that strategy plays out, we're now stretching our reach into Germany, into France, and in Italy. Our Vans consumer is probably the most digitally connected consumer across all of VF.
With our rich arsenal of authentic brand content aligned around our four consumer activation pillars that we talked about last year, action sports, art, music, and street, we're able to deliver this content in a very unique and authentic way, building awareness, building an emotional connection that is as we deliver this content, either through our website, our proprietary Vans TV, or that two-way conversation that we're having with our consumers through social media. We're able to deliver content wherever this consumer is and on whatever device they're using to build that relationship and continue to drive our authentic messages.
Innovation's important to Vans as well. I would tell you, as we've grown in Europe, as we've grown in Asia, and as we've now grown into the colder, wetter environments of the U.S., innovation to us is about taking these classic styles that the brand is known for and bringing them into a four-season model. We're weatherizing our classics products now by bringing unique water repellent finishes like our plasma ion-mask. We're bringing insulative materials, different types of fleeces as inner liners, and we've developed our UltraCush footbed, which is about providing comfort, but it's also providing a warmth benefit into these colder markets. We're leveraging our knowledge from the snowboard boot market and bringing in outsole technologies onto these classic styles, providing our consumers traction in these colder, wetter environments.
Our 66 launch last year has really brought to head a category of product that's got innovation deep in its center. It's through that understanding and knowledge of our 66 consumer and the types of innovations that they're looking for, we're bringing new cushioning and new weight reduction techniques and new high-tech construction technologies that are revolutionizing our pro skate footwear. Our new Rally Light, shown here on the right side of this slide, now has an UltraCush footbed. That was unheard of previously in the skate community. Why it's important, they're still able to have that connection with the board, that feel of the board. They now have comfort, they have the impact protection, elevating the performance of this particular product. In apparel, we're taking our classics action sports products that these kids are very connected to. Again, we're weatherizing these.
We're bringing hollow core fibers to core styles, bringing warmth. We're bringing the ion-mask technology to the outer materials to bring water repellency. Just elevating the level of quality, the level of technology, and enabling this consumer to enjoy this brand, not just in the warm months, but bringing it into the cold and wet weather markets in cold weather months as well. Vans is our strongest retail platform within V.F. Over the next five years, we'll grow from 38% of our total sales to 40%, with doors nearly doubling. We'll grow at a 16% rate per year. E-commerce, just like The North Face, will be where we see the fastest rate of growth as we connect in a very unique way with our consumer.
As our top retailer, this brand is constantly looking at ways to reiterate itself, reinvent itself for retail. Our new global store design really elevates those core DNA elements, bringing the level of experience and emotion to a point that really connects nicely with our global consumer in each of these regions. We're making significant investments in our website. I don't know how many of you have been on vans.com. It's good, but in spring 2014, first quarter, we'll be launching a new website that is seamlessly merging content and commerce into a high-engagement site where we're elevating those unique and powerful stories that build that emotional connection, and greatly simplifying the e-commerce process, which, as you know, when you can simplify the e-commerce process, that traffic converts, and we can drive sizable revenue in one of our most profitable platforms. Timberland.
We're 22 months into the integration of Timberland, and we are as confident as ever that Timberland will be the next powerful growth story for V.F. Two years into our journey, we've touched every aspect of our North America, Europe, and Asia Pacific business operating units. We've activated a global consumer segmentation study. We've refocused our product and marketing vision. We've introduced a robust go-to-market process. We've rationalized our distribution strategy, and we've relocated both of our Asia Pacific and EU offices into V.F. locations in Hong Kong and Stabio. A tremendous amount of work and energy is going into bringing this brand onto our platform. In 2011, we set a target of achieving $2.3 billion by 2015. We remain committed to that goal and have set that target for 2017.
We'll see solid double-digit growth both here in the Americas and in the Asia Pacific, and mid-single-digit growth in our European market, where, as you know, our greatest penetration is in Southern Europe. That, obviously, as you all know, is where we're seeing the strongest economic headwinds. It's important to note, we will grow, and as we grow, we will gain share because not many brands can talk to you about growth in that particular market. This being our largest market across the globe, a very important area for us to continue to invest, and an important market where we will absolutely continue to see growth. To understand our consumer, we have spent more and invested more energy into consumer research the past two years than the Timberland brand has done in its 40 years.
The good news is our consumers are telling us they love this brand. They love the quality, they love the authenticity, and they love the outdoor performance. What's even better, they want to see more. They want to see more newness. They want to see more style. They want to see more head-to-toe looks and more energy. Beginning in fall 2013, and this slide and the slides to follow are an example of how you will see us bring to life the new style, the new elements, and really elevating that rich heritage of Timberland through both our products and our marketing. These well-crafted products with rugged style that just happen to perform outside just like they always have.
Very unique place for this brand, and we're really excited about the team and how they've been able to pull this together in such a short period of time. Two examples of where we're innovating with our brand. It's the 40th anniversary of the Yellow Boot. Great opportunity to celebrate this iconic style, but also a great opportunity to bring new looks, new ideas built off of that platform. On the left of this slide, you see our new Cupsole program. This is born from the Yellow Boot, but styled for today's younger consumer. That's in the market today. On the right side of the page is our family tree. This family tree started with the Yellow Boot. Taking that same quality and authenticity, we're able to really leverage that into whole new platforms, whole new looks, and really building this brand and helping it reach new consumers.
Our women's business is an opportunity for us to really distort this idea of head-to-toe looks and really elevating our brand through the product and through the marketing. There's no better place for us to start than with tall leather boots, for what our brand is known for, but really upping the style and really elevating the DNA, the comfort, and the protection, but elevating that element of style, and in many ways, bringing new products to this consumer will be unexpected. There's a portion of this business that we don't talk a lot about, and it's our Timberland PRO work boot business. Our research here has told us, and really is reinforcing, that Timberland PRO is the leader in durability, protection, and comfort. The Hyperion work boot that you see here really brings to life those benefits.
With built-in anti-fatigue foot technology, our new footbed that's come out of Pro, you will now find that in our commercial lineup. The new Ever-Guard high-abrasion leather. What we learn here, we're able to bring into more functional scuff-resistant materials in our core line. A proprietary Vibram outsole that is unique, providing traction both indoors and outdoors. Apparel is a bigger part of our head-to-toe lifestyle story, where we're able to talk about footwear, apparel, and accessories. We've heard from our consumers that versatility is key, and we're really driving back against that. This collection that you see represented here really speaks to the rugged and weather-ready focus of Timberland of its past. Looks good in the city, looks good in the outdoors or anywhere in between.
We have a significant business in Europe and Asia, that really is the primary focus of Timberland in the past from an owned apparel platform. These looks really elevate and help build our business there. This is also what we will be reintroducing into the United States market this fall into a select number of men's specialty retailers, department store, and also our own stores. Really excited about the opportunity. I'd like to emphasize, this is a reintroduction. We're going to bring this product to market. We're going to learn. We're going to listen to our consumers, and we'll iterate this product.
We've been very clear that we have an expectation of adding $300 million to the apparel business within the overall Timberland, the U.S. market will be a very important part of that, and we're going to be very thoughtful and very careful as we enter here. How we connect with our consumers, we'll focus the majority of our effort in the digital space with great content that we will then distribute online to where we know our consumers are living their lives. Whether they're watching videos, social media, or researching their footwear and apparel purchases, they'll find us on every device that they own. B2C is an important part of this business as well. We'll grow from 33% of our sales to 35%, revenue growing at 11% per year.
I think it's important for you to remember, this is a very profitable part of the Timberland business and a very important part of our long-term growth strategy. When consumers visit our stores, they'll have that same new elevated experience, the traditional DNA married with the new contemporary updates. On the right is our new Chicago store, where you can really get a good example of how we're bringing the brand to life. Along the bottom right or bottom half of this page are some of the new merchandising looks, the ways that we're representing the brand, elevating that contemporary, new, stylish look. International markets for Timberland are critical. The majority of our business is done there today.
As I mentioned, our European team will be going through a tremendous amount of integration this year as they move to Stabio, they come onto our operating systems, really focusing on a new streamlined organization structure. We have incredibly high brand awareness, we'll continue to invest on growing that. We will focus on optimizing our distribution, growing distribution, as we do that, elevate this new lifestyle focus to our European consumer. As you heard last year in our Asia presentation, this is a critical long-term growth opportunity for us in Asia. We're under-penetrated in China relative to where we are in Taiwan, Hong Kong, and Japan. We're leveraging the experience of our Asia team helping this team connect with consumers, scale its distribution, really connect more intimately with our consumers there. That's it.
Today, the theme of this day, as Eric mentioned to you, is reaching $17 billion by 2017. I'd like to leave you with this. This is a diverse portfolio of brands led by three powerful businesses. We have talented and committed people that are dedicated to growing these businesses. As Eric has known, our group likes to be a little bit contrary, in fact, it's our contrary attitude, I think, that's helped us succeed. I would like to leave you with our message, it's 11 by 17, that's a big part of helping V.F. achieve its 17 goal. We're extremely confident that we will continue to deliver the strong results that you've all become accustomed to. Thank you. Now I'd like to introduce my counterpart, Scott Baxter, who's group president over Jeanswear, Imagewear, and South America.
Terrific. Thank you, Steve. That was great. That was just wonderful. Great business. Really appreciate it. Good morning, everyone, thank you for being here. It's great that you came to spend some time with us today. I was really looking forward to our presentation the opportunity for us to get together because two short years ago, we got together, I had a lot to talk about in the Jeanswear and Imagewear business. The really impressive thing is the progress that our teams have made in two short years, we're going to spend a lot of time talking about that today. I'm real proud of what they've done. I think you're going to like this message. Let's go ahead let's talk about the Jeanswear business, the very formidable, very large business.
As you can see, we're going to go ahead and grow from $2.8 billion to $3.3 billion, a strong 4% CAGR going forward. Now, where is that going to happen from a geography standpoint around the world? We're going to have continued strong growth in our Americas region. We're going to stabilize the EMEA region, and we're going to have continued strong double-digit growth in the APAC region. Now, you can't have that growth and you can't grow like that without a strong, leading stable of brands. Look at these brands that we have, Wrangler, Lee, Rock & Republic, Riders by Lee. Nobody has a portfolio of leading brands in the industry like we do. It gives us that platform to grow from. It gives us that opportunity to have the voice of the leader within the industry.
When you have a set of brands like this, it's incumbent upon you to take that leadership role and to innovate and to grow and to bring newness to the channel on an ongoing basis. How are we going to do that, and where are we going to do that? If you look at this slide right here, it's important to note that our existing core is really strong in several areas. We're really strong in mass. We're really strong with the Wrangler patch. And it's incumbent upon us to grow that existing core. How are we going to expand that core? We're going to do it through really intelligent initiatives like our Hispanic Initiative. It's one of the many initiatives that you're going to hear from me today, one of the many things that we're doing from a consumer insight standpoint. It's a really strong demographic.
It's growing, very intelligent, growing in influence, growing in income, and it's untapped for us. Tremendous potential. They love the brand. There's many things that we can do there. How are we going to extend from there? A few short years ago, before we got together two years ago, we didn't have a very large department store business with our Lee brand. But we had received a test right before that with Belk Department Stores. And our test with our Lee Platinum Label had gone so well that we received complete system-wide distribution with our Lee Platinum at Belk. And because that went so well, because we built product for the consumer that the consumer liked, that we listened to the consumer, we received a test from Macy's for our Lee Platinum.
That has gone so well that we've actually expanded that test twice since we got together two years ago. So what's happened since then? This fall, we kick off a test with Bon-Ton Stores. So if you think about it, the progress that we've made in two short years just on that department store business, it gives you an idea of the potential that we have going forward. It's really significant. Now, I'm not going to spend much time on this slide at all, but what I am going to do is I'm going to dig into all four quadrants on this X, and I'm going to give you real-life examples of why our strategy is working and how it's working. There's nobody more laser-focused on the consumer than the folks at Jeanswear. We know our consumer really well. We've known them for a long time.
Wrangler's been around for a long time. Lee is celebrating its 125th anniversary next year. We spend a lot of time, we spend a lot of effort, we spend a lot of resources understanding the consumer, and that really helps us make a difference. We're building product and innovation because, at the end of the day, it comes down to product that people like, people feel comfortable with. They like the fit. They want to wear. I want you to really take a look at this slide. This slide is extremely important to me, and it's extremely important to our business going forward. When I was here two years ago, we probably had 10-12 innovation projects in our current pipeline.
Of those 10-12 projects, we probably thought about them a little bit, and the person that was handling it and the resources behind it were pretty limited. It was maybe the person that came up with the idea, or if it was a Wrangler idea, it was probably someone from our Wrangler brand managing it. Now I want to fast forward 24 months, and I want to share with you how far we have come. We have 80 projects in our pipeline right now, and those projects have been vetted before they've gone into our pipeline. We actually have resources that manage this entire process. Before, like I said, it was just part of what people did during their jobs. We have dedicated resources and a dedicated staff that help us manage this. We have 80 projects, and I want you to think like this.
As you think about these next five years, what have we done? We've created a pipeline of growth and opportunity and product that's short-term. We have stuff that's coming out in the next quarter. We have stuff that's coming out every quarter this year. We have midterm, the next two to three years. We have long-term, four to five years. We have created a path for growth for the next five years. The exciting thing about this, those are just me talking about the aggregate numbers of the projects. These projects are different in nature. We have materials. We have innovations. We have really big platforms around fit, around comfort. We have breakthrough ideas that are really game-changing. That's the difference. Like anything else in life, with 80 big projects like this, you never know what's going to come next.
You never know where we're thinking about some of these projects are smaller in nature from a revenue standpoint, and we have really big numbers attached to some of these projects. You never know when one's just going to explode. This is our spot, shape, build, and scale model. This is extremely important. I wanted to spend a little extra time with you here on this today because this is a path for growth that we've invested in, and it's a big difference from when we got together just two years ago. I think that we're refining this process for the industry, and it's going to be a big difference five years from now when we have a chance to talk about it again. From a serving consumers directly standpoint, we have a really robust e-commerce business.
We hear from our consumers. You know what they tell us? They tell us, "Your product is really easy to shop for online. Your product is really easy to connect to online." People really like our product online. They find it easy. They find it fun. Everybody pretty much knows their size in jeans, knows their size in shirts. It's really been a big win for us, and we're putting more resources against this. I wouldn't say that we're best in class, but what I would tell you is that we work really hard to catch up, and we're working with folks like Steve and his team, have been wonderful partners as far as sharing information, helping us get better, and that's just leveraging one V.F.
That's what makes V.F. fantastic because we have people who do world-class stuff that we can steal from, and it's all good because it's part of the family. We're really growing there, and we're getting better, and our business has been growing double-digit for at least three years now, and I'm excited to talk to you about that again in a few years. The other part is I wanted to show you a couple of our different stores, and the stores are really important for us. You can see our Wrangler store in Germany and one of our Lee stores in Asia. They're really important for us because they help us tell the brand story. It lets the consumer touch us and touch our brand directly.
One of the single most important things the store does for you, it gives you instantaneous feedback on your product. You know immediately if your consumer is accepting and taking that product and they like it. Not only can you tell from the cash register, but you can tell from the interaction from the people that you have at the store. That's real important. From a geography standpoint, I utilized this slide, and I utilized the Americas and South and Central America for a specific reason. Over 70% of the business that we do in the global Jeanswear category is in these regions. Why I utilize this is not. I didn't want to show you where we didn't do a lot of business and talk about all this opportunity where we didn't do a lot of business.
I want to impart upon you where we have a big business, and I wanted to share with you why we still have tremendous opportunity. In the U.S., the Americas, all the way from Canada down to Mexico, I already shared with you that we've got this big Hispanic platform and opportunity. It's untapped, huge potential for us, and that's happening right now. It's growing right out of our mass, which is a substantial business. I talked, or I'm going to talk a little bit about our Western theme and our Western culture and still the great opportunity that we have there. I talked about our department store business and how that's growing and how well our tests are going. That's just an example of where we have a really strong core business, and yet we still have tremendous opportunity.
We have really well-known brands in a very big and dynamic marketplace. We haven't tapped into that potential yet, but we are going to do that. We've got a platform now down there. We're kicking that off right now. We've just announced our president that's going to go down there and run that business for us, and we're bringing the V.F. platform together. There's huge opportunity down there to bring the power of V.F. and to grow that business. A good example of just how we can do it in two different ways. This tells you a little bit. We're going to grow the Wrangler brand to $1.8 billion. Strong 3% CAGR growth going forward. I started with this slide. It was important to me to start with this slide.
You might think, "Why not start with the mass slide?" Because that's our huge mass business, right? It's our biggest business that we have. I started here because of the authenticity. Wrangler was born in 1947 for the We built a product called the MWZ13, and it was built for the cowboy. It is absolutely, without question, the single most important piece of apparel in a cowboy's closet. They live for this product. It is our heritage. It's our authenticity. I will tell you, they wear that product to get married in, to go to graduations, to go to school in, to work in, to play in. They wear Wrangler, and they are our biggest ambassadors that we have.
We have a leadership, a strong leadership position in this category in both men's and women's, in tops and bottoms, and we can anchor so much out of this platform from an innovation standpoint because they're such brand champions. They love newness. They love innovation, and they purchase it when they see it from Wrangler. They really get behind the brand. They're just incredible ambassadors. I wanted to share a little story with you about this product. The number 1 selling item that we have in our Western line is a product that we made that I just referenced in 1947 called the MWZ13, built for the cowboys. We kind of figured that 1947 to 2013, the cowboy maybe has changed a little bit. They do have cell phones now, and they actually use them, and certain things have changed.
We went down deep in the heart of Texas and spent a couple of weeks with cowboys. We rode with them on ranches. We worked with them. We asked them a ton of questions. We spent time. We got their feedback. We tried to understand what they want to do, what they look for in a product. We went back to the lab, and we built a fantastic new product. It's similar to the old product, but it has some new features, like a cell phone pocket, like a little different fit. People are bigger today. Like a little different inseam, maybe a little different fabric in a couple of cases. But it's a product that zoomed in two short years to our number 2 best-selling item. I think it's a great example of where someone might have said, "You know what?
It's the number one selling item in your line. Why build another product to compete against it? Why mess with it?" Well, I really am impressed with our people because they thought, "Hey, we can enhance the whole line. We can build something even better. We can build something for the old and the new. People can have both." It has helped grow and propel our business greatly, and it's helped us really think about newness and innovation within the Western channel. Who are these people? They're the authentic cowboy. That's the person that actually lives and works in the Western world. They might be a rancher. They might be a cowboy. They might be a country singer. But it's people who actually live and make their living and spend all day in their Wranglers. It's the most important piece of apparel they have. Brand champions.
It's the new cowboy. That's the person that really loves the culture, loves country music, loves to rope, loves to ride, loves to spend time outdoors, but has to have a different job. Maybe as a teacher, maybe as a fireman. As soon as the 5:00 bell rings, they throw on their Wranglers. When the weekend's here, they're riding horses. They're listening to country music. They love our product. They wear it. They're inspired by it. We're building products for them. Then there's also the Western-inspired cowboy. That's maybe a person a lot like you and I. Maybe there's an occasion where you like to just throw on your Wranglers and go out and listen to some country music twice a month.
Maybe you just like to throw them on because you feel great about it, and you love the culture and you love the feel and the thought of being like a cowboy. That's a huge category that's actually growing in influence all around the world, actually. We're pretty excited about it. It's really growing in the States. It's really growing in South America. People are really moving back to a simpler time and a culture and that Western theme and that culture, and they really like it. As we look at the business, there's significant opportunity in all three of those. Let's talk a little bit about mass business. It's a significantly large business, really important to VF Corporation. Also, we're a leader in this business. We take that position really serious. We know this consumer better than anyone.
As the leader, we have to play offense. We have to set the bar for everybody else. We're doing that from an innovation standpoint. The single most important thing for these folks in this category, the single most important thing is comfort. These people wear their Wranglers all day long. They work in their Wranglers. They garden in their Wranglers. They coach Little League in their Wranglers. They go out in their Wranglers. When we talk to this consumer, they're constantly telling us, "Comfort." It's a huge platform for us. It's a big differentiator for us, and we're building product around comfort. This is a product that we're coming up with called Flex Tech. It's got some stretch in it, I'm here to tell you, don't mention stretch with men. They don't like it. We call it Flex technology. They like that a lot better.
It's an extremely comfortable product. This product has tested in our mass business better than any product we have ever come out with. What we've heard from our consumers as we wearer tested this product was two things. One, it's my favorite piece of apparel, and two, it's my most comfortable piece of apparel. This is hitting the market as we speak. This is part of a much larger comfort platform within this channel that other parts of our business can draw from because that's the power of V.F., and you're going to hear some more about that in the future. Who are our brand icons? How do we bring the brand to life? How do we tell that story? We do it with three folks, specifically in the Wrangler business.
Most of you know, we've been with Brett for a long time. Brett hasn't played football for a few years, he still really resonates with the consumer. They really like his lifestyle, what he stands for, what he accomplished. We utilize Brett from a rugged standpoint. As you watch our advertising and our commercials, Brett is our outdoor guy. He's the guy that gets out and makes it happen. You see in the commercials, he's with his dog in his truck. He's playing football, all that stuff, having a lot of fun. By the way, that's actually on his ranch that we shot that one commercial that you might be thinking of right now. Just a terrific guy, a great spokesperson. Then we have Dale Jr. We've been with the Earnhardt family for a long time.
They've been Wrangler wearers forever, they are just terrific folks. We use Dale Jr. from an authentic standpoint. That's how we capitalize on that. Then I'd like to welcome to our family, Drew Brees. For those of you that haven't heard, we just signed Drew Brees. We're utilizing Drew because of his work in the community, because of his work after Katrina, because of all that he's done with his foundation. He's really a strong family person, really strong values. We're using Drew from a family and social standpoint. We really feel like from a consumer standpoint, we've captured the essence of the brand, really have a strong communication channel to and from with our consumers. Let's switch gears just a little bit. Let's stay in the Jeanswear group and let's talk about Lee. Growing from $1.1 billion to $1.4 billion.
Very significant. Big product for us, big brand for us. Nice, strong, mid-single digit CAGR. How are we going to do that? This is really important. I wanted to share with you and talk a little bit more about innovation. This is our new Shapetastics product. We scanned 5,000 unique different women. 5,000. Scanned their body so that we could build a better product for the department store channel. This is about to hit the department store channel. I am here to tell you this is a game changer. You heard me talk earlier about several of the different brands. Excuse me, several of our different consumers. What we heard from, specifically from our Lee female consumer, single most important thing for them, fit. Fit is number one.
We have gone back, we have done our research, we've done our homework, and we've put the time and the resources into this with our new 360 tailoring. This is going to hit the Belk, the Macy's, the Bon-Ton Stores of the world. This is a game changer because fit is so important. A female consumer loves to have great fit because it gives them great confidence in what they're doing in their jeans. Whether it's work or play, it just exudes confidence, and it helps you feel better about the product you're wearing. We have really great technology that we've really thought through that is an absolute game changer, and this is another platform. This fit platform is big for us, and there's a lot of opportunity in this fit platform going forward.
I'm going to pause here for one second because I put this in because it's really important, and I want to tell you why, and then I want you to read it. These are some testimonials from some Lee customers. What's happening in the world today is people are doing a ton of research before they get in a store about product. They're doing that research online, and they're doing that research with their mobile device also. They're doing that research in the store, too. It doesn't just have to be before they get there. They do it in the store, too. Something that's really interesting is probably more than ever in our culture, people are taking cues from others on what's important and what to buy and whether someone else likes it.
Bloggers and testimonials have become extremely influential within our world, and these are just a couple of our testimonials. The only way that you can get testimonials like this is you have to build fantastic product. You have to lead in innovation. We are gaining these type of testimonials. This is why Lee is winning. This is why Lee will win in the future. That, in addition to many projects in their innovation pipeline. A fit platform that they have going forward. A really significant opportunity for us going forward. Social media will really help us do that. We got together in September in Shanghai and spent some time talking about the Asia Pacific business, I just wanted to go ahead and reiterate, although we were just together not that long ago. Strong, continued double-digit growth in the Asia Pacific region.
With that, I'm going to wrap up Jeanswear, I'm going to move over to Imagewear. We don't spend a lot of time on Imagewear as far as talking about it with you folks, it is a very formidable, very large, and very significant business encompassing two divisions, the Image Workwear division and the LSG Sports License business within the Imagewear coalition. It's very large. We're growing to $1.3 billion, a strong 4% CAGR going forward. I think it's really important to note here a significant cash generator for V.F. Corporation. A really important cash generator for V.F. Corporation, also a really interesting business for V.F. Corporation because we get to look at the consumer in a different way. We get to see the consumer's eyes through a B2B focus. We get to see the consumer's eyes through a licensed piece.
Although Karen has a big licensed business, this is another substantial licensed business. It's different for us, and it helps us understand our businesses a little bit better because we get a couple of different lenses to look through, and we're sharing more and more at V.F., and it can only help us going forward. When you look at this leadership set of brands, it's stunning. Number one in workwear, Red Kap, since 1923. Number one in FR. Significant growth over the last five years with Bulwark. Majestic. On-field, authentic Major League Baseball. Only one person can be on-field, only one person can have that authenticity, and we have it. Then if you look at the other marquee businesses that we do business with, there's no better set of assets to have a license with than the NFL, the NHL, the NBA.
We don't have the NCAA on here, that's also one of our businesses, and of course, Harley-Davidson. I always joke and talk to the people that there are very few businesses that you're in that people tattoo themselves. If you really think about it, all the tattoos that people have of Harley-Davidson, the passion they have for that brand. All the sports tattoos that are out there. People have Yankees tattoos, Red Sox tattoos, Packers tattoos. These are people that are very passionate about their apparel and very passionate about their brand. Where do we do business here? Who are our consumers? In the image business, we do business with large multinational corporations, people in the oil and gas services, people in the manufacturing and automobile business. Those are significant customers. Large government institutions are big customers. Big utilities for our FR product to protect their employees.
Then also with large global distribution companies like Cintas and Aramark and AmeriPride and Uniforms. From an LSG standpoint, we do business at stadiums and concessions. Anywhere you want to pick up your apparel. I'll tell you what's become a really, really important channel for us from an LSG standpoint. That's the e-commerce channel. The reason being is so many of you might not be from New York or wherever you're from, wherever you're living now. That might not be, and most likely isn't, if you're a professional, where you grew up. Your travel and your work has taken you someplace else. You still have that affinity. If you grew up in Green Bay and you ended up moving to Denver, you still love your Packers.
Well, we make it really easy for you to buy your Packer apparel online, that channel is getting larger and larger as people become more displaced in America and they want to follow their team. Of course, with our retail partners. Let's talk a little bit about the image business. I specifically put this slide in because it was really important in a couple ways. One, I wanted to share with you earlier, you remember I talked about our comfort platform that we talked about with Wrangler? Well, here's a great example of Wrangler and of image coming together, creating a product from a comfort standpoint that's going to lead in comfort in the industry. Here's what happened. Our people had been talking to, and always are doing research with their consumer.
One of the things that we found out is Red Kap plays in a certain marketplace, right? There was an opportunity to play one level above there. We were thinking about what brand we could do that. Do we create a brand? Do we partner with a brand? Then the one thing that we consistently heard from this consumer was, "Yeah, the first thing that I do when I get home, I take off my uniform, I put on my Wranglers." It's like, holy cow. That consumer is using our other products. That consumer is using Wrangler. Why not use the Wrangler brand? Why not bring the comfort platform over, create a product that is just superior in not only comfort, but mobility? Because we call these occupational athletes because they're moving and changing tires and oil or whatever.
They've got to stretch, and they've got to move around. We are just now kicking this product off in the marketplace, and we think there's just incredible potential for it. It's a really great example of communicating one V.F., talking. Taking advantage of this huge comfort platform. Taking advantage of the relationship that we already have with our consumers from a Wrangler standpoint. You heard me say they're literally taking off their work uniform, and the first thing they put on is their Wranglers. We're going to go ahead and outfit them from the morning they get up, or excuse me, from when they get up. We just got to get them some Nautica pajamas, right, Karen? They go to bed in Nautica, and then they get up and wear Wrangler the rest of the day.
This is really that consumer that we have and how we're working with them, how we're making sure we do. This happens to be probably one of my favorite stories at V.F., I am going to take an extra minute to tell you this story because I think it's really a great story of ingenuity and a great story of our people thinking a little bit differently, going against the grain, and how they've been rewarded, and we've been rewarded as a company. Do you see that shirt up here? That is just in the far right-hand corner. That is our new automotive work shirt. We make hundreds of thousands of automotive work shirts. Hundreds of thousands. We have forever. We've made those forever.
For the last decades, us and the competition have raced to the bottom to take as much cost out of that shirt as possible. What I mean by that is you have a shirt, and you're trying to generate additional gross margin. We continued to take make out of the product and make out of the product and try to make it more profitable. It was a race to the bottom with these. We completely commoditized the category, right? We go out, and we're talking to these folks, and here our folks are, and they're talking to these folks, and what do these folks say? They say, "We really don't like wearing the shirt anymore. I don't feel any pride when I'm interfacing with the consumer. I can't do my work.
I can't perform in it like I used to because you took so much make out of it. You took my tool sleeve out of it. You took my placard off of it. I can't protect myself." Our people came back, and they said, "You know what? Here we are again, trying to think about how we can take some more make out of the product. Why don't we do something completely opposite? Why don't we do a 180 here? Why don't we put all the make back in?" Here's what we did. We went back to the drawing board, and we put all the make back in the product. We put a whole tool sleeve in. We put a placard in. We put long sleeves on because we were trying to go to short sleeves because they're cheaper to make, right?
We put a couple of different colors in because we had mono-colored everything. We put much better fabric in the product. We put placards in. We put gussets in. It's the single most piece of comfortable, yet functional, workwear you'll ever wear. Guess what? For 2 years, over 50% growth in a category that had been dormant for years. Our business has been up over 50% 2 years running, and we charge double what we used to charge for a shirt. Here's what we hear from both associates and employers. From the employers we hear it's a retention factor. We actually are retaining people, we think, by giving them apparel that they're proud of and that they can wear. What we hear from the people that wear it, they love coming to work in it. They feel great about interfacing with the consumer.
I just think it's a great example of our people listening and our people saying, "Hey, wait a second. Enough's enough," and doing something a little bit different, and having the courage to do that. Let's spend a little time on the Licensed Sports Group. I shared with you a little bit about this business. Most of what we do starts with our authenticity in Majestic on field. We're building great, craveable product for the people that are passionate about their sports teams, for those incredible winning moments, whether it be the World Series or the Super Bowl or whatever it may be, and they actually like players, too. When we got together 2 years ago, I talked to you about this business, and I shared with you how we innovated around just specifically on field.
Our team since then has created these four platforms to start building product and innovating around. That is really important to note because we had limited ourselves before with just this one platform. Now we have four, and we've got just this much bigger universe. Now we're building and doing out of these four versus limiting ourselves in this one. I wanted to give you a specific example of what's happened from that. We used to make women's product. We used to have focus groups, and our focus groups used to be male-dominated. We used to make women's product that really wasn't comfortable. It was just a smaller size men, maybe didn't have any fashion, and we really weren't listening.
We've since gone back to the drawing board in the last couple of years. We've listened to women, and they've told us, "We want fashion. We want design. We want lighter weights. We can't wear that heavy stuff that our husbands and our boyfriends wear. We want things that we can be proud of, that we would wear, that we might even not just wear to the stadium or the game, we're going to wear it out. We need a tighter form-fitting product. We need better silhouettes." We've come out with products like our new women's replica, Smash Hit. We've come out with the Shimmer top, the number one selling women's piece in the NFL. That product has just flown off the shelves. We did it through listening. We did it again through these four platforms and making sure we understand what people want.
We're building product for people. We're listening to them. We're understanding what they want. We're having success because of it. Again, just a quick note on the CAGR. My time is up with you today until we get together for our Q&A here later in the day. I did want to leave you with this. Two short years ago, we got together and spent some time. I was so proud of the team and the progress they had made and all the things that they were doing. It's really unbelievable for me to think all that we've done in those two short years. It's just shocking. Now we've got five years to do even more. We're so much more intelligent about our business. We have so much more from a resource standpoint to apply to our businesses.
We have fantastic people doing great things. We're real proud of what we're doing. You can count on us to continue to do that, to be thoughtful, to be intelligent, and to really grow this business going forward. I can't wait to get together again because I can't wait to brag about all the great things our folks are doing. With that, I want to introduce Karen Murray, our President of our Sportswear division.
Thank you. Hello, everyone. Me, then one other presentation, then some coffee. I'm really excited to talk to you today about Nautica. It is actually my first time talking to you as a group. I've talked to some of you individually, but it's my first time talking to you about Nautica's growth plans. I'm going to give you a few examples of how the brand has evolved and grown over the past few years. V.F. Sportswear Coalition in 2012 was at $577 million in revenues and will grow to $835 million by 2017 at an 8% CAGR. Growth is driven by both brands, Nautica, which represents about 85% of the Coalition revenues today, and Kipling, which represents about 15% of Coalition revenues. Nautica alone is expected to grow from $500 million in revenues in 2012 to $700 million in 2017 at a 7% CAGR.
This business has continued to improve. The past two years' revenues have grown at 5% each year, and we are projecting 8% this year, we are confident we can hit the 7% growth goal. Our revenues are comprised of wholesale, outlet, e-commerce, and royalties from our licensed businesses. Unlike all the other brands you will hear about today, Nautica has a large licensed business. In fact, on a global basis, the brand is over $1 billion. We are focusing today on four areas to grow. There's that X again. We're going to drive higher gross margins and build strong brand equity. The first concept focuses on leading in innovation and connecting with consumers, and I combine those two. Today, across men's sportswear, as you all know, there is a sea of sameness in many of the product categories.
That is why men's sportswear is a low brand loyalty category with a high degree of substitutability. When we look at the next five years, one of the most important things for Nautica is to enhance brand equity and loyalty through building a performance platform, which is new for the brand, and differentiated products. As you've seen with all of our brands today, one of the great benefits of being part of the V.F. family is the ability to leverage our innovation and our strategy platforms. Many brands are either true performance brands, high performance, or fashion brands. With Nautica, we merge fashion and function. Along these lines, I'm really excited to share with you how we execute this in one of the largest parts of the men's sportswear category, short sleeve knits. Let's take a look at our iconic deck shirt.
Hopefully, some of you will have seen that upstairs this morning. I would like to bring you through the evolution the past few years. Starting in 2011, we offered a basic 100% cotton deck shirt, not unlike any of the other men's sportswear brands out there. In 2012, we raised our game and created the performance deck shirt, a cotton poly blend which maintained the hand feel of cotton, but added everyday benefits of breathability, moisture wicking, easy care, and UV protection. In 2013, we continued the evolution with the performance tech PK. This is 100% poly, but it offers a much more luxurious hand feel and the addition of quick dry. Over the past three years, by improving the deck shirt with performance characteristics, we've been able to increase the out-the-door price by over 20%. In fact, this category this year is up over 60%.
To give you a sneak peek into next year, we're adding a signature stripe enhancement to the performance deck shirt. For spring '14, we are elevating our design detail to include a signature stripe placket and brighter trim and contrast logos, all identifiably Nautica. This shirt, by the way, comes in over 30 colors. We've conducted concept tests to assess this enhancement, and product tested very well with consumers demonstrating higher purchase interest, differentiation, value perception, and likability. We added technologies, for example, waterproofing and moisture wicking, into many of our different product categories. While I'm showing you just one shirt, know that we've applied these technologies to many of our different categories. We are also adding marketing messages around differentiation. We will be introducing a new concept, which is due to launch again in spring '14, two new concepts for spring '14.
It is a new outerwear piece, which will have the benefits of seam seal technology, stretch. Like Scott, we don't call it out. It's breathable, it is waterproof. Again, hitting the sweet spot of style and function. We will take that concept and then apply it to pants, to jeans, to many of our other product categories across the board. At the same time, we are also completing consumer segmentation work. That is just to understand, define, and then target our consumer even better. The next area I'd like to talk to you about to serve consumers directly is D2C, direct to consumer. We are working hard to drive this business to a greater percent of total and to increase overall brand control by investing in our e-commerce platform and introducing full-price stores domestically.
We have been and will continue to expand geographically with new flagship stores and with our key license and franchise partners. This is a major growth driver for us through 2017. Direct to consumer represents just over one-third of our Nautica business today through 88 outlet doors and our website. Wholesale will continue to remain a significant portion of our business. Of course, this is led by our partnership with Macy's. D2C will grow to over 40% of our total business by 2017. That's driven by comp store increases in our outlet business and growth in our nautica.com site and expansion, as I just mentioned, into full-price retail in the U.S. Nautica is launching a redesigned site for fall 2013. Menswear.com sales for other retailers in our space usually represent, in menswear, 10% of total business, while we are at less than 5%.
This does present a major opportunity for the Nautica brand. The goals of our new site are to create a better shopping experience, increase consumers' emotional connection to the brand. To ensure that we reach these goals, we are leveraging utilization research in redevelopment of our site. We are incorporating product-focused content around fit and styling to drive appeal, conversion, and overall sales. In addition, our current website only serves domestic customers. We need to expand this globally. Our number 2 fan base happens to be Mexico, we're not serving these customers today. Nautica has continued to expand its international footprint through our licensed business. Our international partners are incredibly important to our business. They represent about half of our licensed business today and are increasing as a percent to our total.
We are today in 75 markets outside of the U.S. We have 220 full-price stores that look very similar to the one you see up on the screen in Panama City. Consumers in our international markets consider Nautica to be highly aspirational. It is seen as a very premium, classic brand. We are finding this to be particularly true where Nautica has greater control over its distribution. The face of the brand is through these full-price flagships. To capitalize on this elevated image domestically, Nautica is planning to open full-price stores in the U.S. beginning in 2014. Over the past year, we have incorporated consumer insights into our launch plan and our store build-out, which is currently in development.
In summary, the last three years have been transformative in the way that Nautica thinks about consumer insights, how to address their needs through innovation, and how we tell our brand story. Both Nautica and Kipling are focused on strategies that will help us win against competitors by growing share, increasing emotional connection, raising brand equity, and delivering superior margins and ROI. This has begun to show in our financial results. Over the past two years, we've turned a corner in our financial performance. We've expanded gross margins and added marketing investment, all while increasing our overall profitability. Our brands have grown steadily, and we are so excited about the future of our businesses. Now I'd like to introduce Susan Kellogg that will bring you through all of our contemporary businesses. Thank you.
Here you go.
Thank you.
Hi. I'm here today to talk about the contemporary brands. Over the next five years, we expect the contemporary category to continue to lead the apparel growth. For V.F., we expect to add $200 million in revenue. With solid organic growth in the U.S., our largest business, due to DTC product and category expansion, our highest growth rates will continue to come from our international markets, where we see a lot of opportunity. 7 For All Mankind, our largest contemporary brand, will grow $100 million globally, with two-thirds coming from DTC and one-third coming from our wholesale business. All four strategies are vital to our continued growth. I'd like to start with leading in innovation. Yes, we're back to the X again. Innovation is critical to the Contemporary Brands Coalition. 7 For All Mankind has a well-established and proven innovation pipeline.
For example, in 2012, we launched the Slim Illusion in women's denim. This fabric has the unique ability to retain its shape, excellent recovery, and comfort, while being able to endure the rigors of advanced washing techniques. This was a $10 million idea and is still going strong. This fall, we're launching its sister, Second Skin Slim Illusion, with 100% recovery. Never been done before. The bookings are already outpacing our previous launch. We're also taking this technology to men's this fall, Luxe Performance, and have already exceeded our forecast before we even shipped. These jeans will. Oh, Malhia Kent. Sorry, had to do it. Didn't know if it was going to happen. Malhia Kent, for those of you who are here in person, these jeans will retail for $395. They will only be available in select stores worldwide.
This is one of our most exciting collaborations we've done in the coalition. Malhia Kent is a very high-end couture mill in France, and we are very excited to debut this in July. Print and celebrity marketing are nothing new to contemporary, and particularly important for our 7 For All Mankind core customer. In spring, we launched our first global multimedia, fully integrated marketing campaign with James Franco. This has been an enormously successful partnership, which we have continued through 2013. James Franco, who some of you may be familiar with, is more than just an actor. He's a painter. He's a filmmaker. He's a singer. He's a scholar. He's a poet. He's our friend, and a true renaissance man for 7 For All Mankind, a marketing innovator. He continues to create buzz and original content for us.
This is imperative in building brand affinity, as the millennials are voracious in their media consumption. Simply put, we need to be everywhere they are. Now I'd like to show you one of the 7 For All Mankind clips from our spring 2013 campaign. With this content, we were able to engage our consumers by giving them the opportunity to vote on the storyline of James' film globally through the 7 For All Mankind Facebook page. We now have two cuts of the film that are available on our page: James' original director's cut and our customers' version. As we all know, fashion is no longer dictated by an elite few. As seen by Aimee Song, who's pictured here, a fashion blogger who is a friend of 7 For All Mankind. She is a powerhouse.
She not only wears our jeans, photographs herself all over the world in our jeans, but she has 7,000 unique monthly visitors to her blog site and 845,000 Instagram followers. Really remarkable when you consider Vogue sells 1.2 million magazines a month. Really an incredible feat. The millennials have changed the fashion game, and we have changed with them. We also engage with our customers in our stores. We recently leveraged our relationship with celebrity Nikki Reed, where she previewed her exclusive jewelry collection in our 7 For All Mankind stores. You can see the tremendous line outside our new Orlando store for this event. It was very successful. This was a great way to enter a new market, drive traffic, and acquire and engage new customers. Moving to DTC. In 2012, about a third of our business came from owned stores and e-commerce.
By 2017, we plan on more than doubling our stores globally and are expecting our DTC business to grow to 43% of our sales. The next five years represents a very exciting opportunity for us to continue to tell our story in our own stores and grow with our fantastic wholesale partners. Additionally, we plan on more than tripling our global e-commerce business by 2017, driven by increases in all three of our major markets. The international business is very important to 7 For All Mankind's future growth and brand relevance. We expect it to go from 37% to 48% in 2017. This is possible through leveraging the V.F. international platforms, a definite competitive advantage. This concludes my presentation for today. Thank you for your time.
Ladies and gentlemen, we'll take a 15-minute coffee break here. The coffee setup is on the right side of the room. Thank you.
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Jama, jama, jama, auntu. Jama, jama, jama, auntu. Jama, jama, jama, auntu. Jama, jama, jama, auntu. Adende mende koyina wa, inde mende koyina ke tese. Adende mende koyina wa, inde mende koyina ke. Shevata ratungana, amatsara paula, amatsara baula, amatsara korola, amatsara mutola, amatsara deuna, amatsara chigeona ye. Ningoke rama guta ye. Shevata ratungana, amatsara paula, amatsara baula, amatsara korola, amatsara mutola, amatsara deuna, amatsara chigeona ye. Ningoke rama guta ye. Amutoseke nakofe, aye fe juguke, aye juru juguta, aye yala juguke, aye tunyari juguke ye. Ningoke rama luyaye. Amutoseke nakofe, aye fe juguke, aye juru juguta, aye yala juguke, aye tunyari juguke ye. Ningoke rama luyaye. Jama, jama, jama, auntu. Jama, jama, jama, auntu. Teninta ratula a, ama wulo pauye e, ama wulo pauye a. Teninta ratula a, ama wulo pauye e, ama wulo pauye a. Ningoke rama luyaye. Ningoke rama guta ye. Ningoke rama luyaye.
[Foreign language] Ningoke rama guta ye. Ningoke rama luyaye. Ningoke rama guta ye.
[Foreign language] Mírame. Mírame. Mírame. Mírame. Porque al menos quiero que tus ojos llenos de tanto silencio y amor me den el consuelo. Déjalos mirarme, que toquen mi alma, bórrame la vista de ti. Déjame la calma para que al besarte suave te enamores de mí y verme en tu mirada. Mírame de día y de noche, eres lo que anhelo. Yo quiero tu amor, ¿por qué? Porque más y más te quiero. De día y de noche, dulce caramelo. Yo quiero tu amor, ¿por qué? Porque más y más te quiero. Mírame. Déjalos mirarme, que toquen mi alma. Bórrame la prisa de allí. Déjame la calma para que al besarte suave te enamores de mí y verme en tu mirada. Mírame de día y de noche, eres lo que anhelo. Yo quiero tu amor, porque más y más te quiero. De día y de noche, dulce caramelo.
[Foreign language] Yo quiero tu amor, porque más y más te quiero. Yo quiero tu amor, porque más y más te quiero. Que mi cariño es verdadero. Porque más y más te quiero. Yo te hablé de amor. Yo te propuse algo sincero. Porque más y más te quiero. Con toda mi alma y con todo mi corazón. Porque más y más te quiero. Por tus ojitos de día y de noche. Porque más y más te quiero. Mira, cuando te digo es verdadero. Porque más y más te quiero. Sí, yo quiero tu amor, porque. Porque más y más te quiero. Repito. Yo quiero tu amor, porque. Porque más y más te quiero. Muchacha, yo quiero tu amor, porque. Porque más y más te quiero. Bonita, yo quiero tu amor, porque. Porque más y más te quiero. Yo quiero tu amor, porque. Porque más y más te quiero.
[Foreign language] Sígueme. Yo quiero tu amor, porque. Porque más y más te quiero. Morena, yo quiero tu amor, porque. Porque más y más te quiero. Mulata, yo quiero tu amor, porque. Porque más y más te quiero.
Ladies and gentlemen, our program will resume in five minutes, please. Thank you. Ladies and gentlemen, if you'll take your seats, we're about to begin. Just a reminder to please turn off your cell phones. If you have turned them on during this break, please turn them off again. Thank you so much. Ladies and gentlemen, we are about to begin. Please take your seats.
One of V.F.'s greatest strengths is that we have a dedicated platform that allows the businesses to develop their strategy in a very integrated way. Our group help the business leaders across the globe. What we can help them is the way of thinking strategically, more analytically, and make sure we are balanced the long-term with short-term growth. Recently, we had opportunity to work with the Lee business here in the U.S.
In order to hit our financial target for the next five years, we knew we had to grow faster. Our current playbook told us that we were doing very well in the mid-tier. We knew that we had to reach to other channels, and that's where we really needed the business strategy group to help us understand what those opportunities were and how we were going to win. We tend to focus in the lens that we're used to looking at. They really widened that scope for us and gave us a lot of other possibilities to at least analyze and see if they were worthwhile.
For us, our expertise is to add on the extra analytical rigor to bring in outside view to broader business, the view of how you grow in the future.
One of the key choices that came out of this was that we really needed to expand our channel distribution, the strategy group really helped us identify that the department store category was where we really wanted to go.
Going into a department store opens up a whole new different world for the brand. It helps it to reach a different clientele. It helps it to elevate the brand positioning.
We changed the product some. We also introduced a sub-brand, Lee Platinum Label, designed for this department store consumer. We tested in 30 doors last year at Macy's, the test was phenomenal. The goal is to get to 350 doors for 2014, so far it looks like we're on track.
VF success has many different sources. I think having internal strategy team integrated in a way you can incorporate consumer brand innovation work together, I think that is very unique.
That's very exciting because the team's been engaged from the beginning on, and now to really make it happen and to see the results that we're getting is just incredible.
Ladies and gentlemen, Vice President of Strategy and Innovation, Stephen Dull.
It's a pleasure to be here. The next 25 minutes or so, I'm going to talk about our front-end platform and how we're adding value to the front end of things. We've always been really strong on the back end. Our supply chain has added hundreds of millions of dollars over the last Well, actually, probably even just recently. We intend to be as good, if not better, on the front end and to add equivalent value. What I'd like to do is take you through our four front-end disciplines: strategy, consumer insight, brand management, and innovation. You've seen that in all the presentations, and you've seen a number of examples. I'll go, obviously, one by one. Strategy. Strategy for us is about making choices. We have a very disciplined and rigorous process to make choices.
It's not just choices about what to do, it's choices about what not to do. We don't want to do things with a marginal return, and that's maybe even more critical than choosing what you actually have to do. We have a process. I'll take you briefly through it. It starts with very aggressive aspirations. All of us who work with Mr. Wiseman know we have really aggressive aspirations. It starts with a question about how big can we be or how successful can we be. There are other aspirations too. For example, Timberland wants to be the largest, most sustainable outdoor brand in the world. That's an example of another aspiration. Again, strategy is a set of choices, and we think of it as a cascade of choices.
If you're going to meet your financial targets and you're not going to get into trouble with Mr. Wiseman, you better figure out where you're going to play. Where are the best places to get that? For Timberland, they want to be the largest and most sustainable outdoor brand in the world. They better choose a consumer target that cares about that. We make choices about geographies and channels. It's really important that you know how to win in those where to plays. You have to know how you're going to win that consumer target. You're going to have to know how you win in those channels. When I say winning, I do mean against competitors, I do mean gaining share, but also winning financially. We want superior returns. Some examples of how to win, brand position, innovation.
There's others, I'll talk particularly about those two. If you're going to win, you better have the capabilities to win. V.F., I think we have and would like to have the best consumer understanding of anyone in the industry and beyond our industry. We think it's necessary. We know that it adds a lot of value. You've heard a number of examples. Lastly, what gets measured gets done. We're going to make sure that we're going to measure what we're doing. By the way, if you don't have the capabilities, you better look at a different way to win. If you can't win, you better look at a different place to play. That might mean that you can't meet those aspirations. It works both ways.
We do start making choices of what to do and what not to do in a very disciplined and rigorous process for doing that. How do you create value with that? First of all, it ensures that those goals that we set can be made. It also focuses that business on winning against competitors, growing equity, financially exceeding their competitors. It also prioritizes actions. We know, again, what to do and what not to do. What that does, it drives really effective and efficient use of the resources that our shareholders have given us. How do we use this at V.F.? Some of the things that you've been hearing about, which geographies at which pace get what level of investment? Which brands get disproportionate levels of investment? Also identifying new spaces for V.F. to enter.
We use these set of choices to make those choices at corporate and in our brands. Some of those examples, which consumer target provides the best opportunity to grow? What consumer benefits are we going to offer that will be different, better, and relevant to our target consumer? Next. Consumer insight. Consumer insight, you've heard from a number of our businesses, it is about injecting the consumer into everything that we do. Two fundamental foundational aspects of consumer insight. The first is segmentation, then I'll also take you through shopper behavior. You've heard a lot about segmentation. It is the science of picking your most valuable target. We've done this with all of our top brands and all of our major geographies. We are really serious about identifying who our target consumer is. Over the last four years, we've done 1,000 video ethnographies.
That's where a consumer takes pictures of their own lives and our brands in their lives, they send that in, and we analyze it. We've talked to 3,000 people in person. We've gone into their closets. We've gone shopping with them. We talk to them one-on-one. We get to know them over a period of several hours, and sometimes, I think Scott referred to this, over several weeks with the Cowboys. We have surveyed more than 80,000 people across 12 countries. Again, we take this really seriously. By the way, Nautica is engaged in global segmentation right now, as Karen mentioned. We'll be well over 100,000 consumers that we've talked to in the last four years. Again, we take this really seriously because we know that this is the way we're going to create value. Here's an example from Vans.
You're seeing a summary of a summary of a summary, but just to let you know how we do it, we deeply explore a lot of different facets. We look at motivations and values and needs. We look at what activities they're engaged in culturally, sports engagement, and most importantly, we look at how much they spend. We use some pretty sophisticated analytics to group those sets of needs and motivations and values into like-minded other consumers that are like them. We compare those groups, and we say, "Okay, which is the most attractive for us?" We look for where's the most value, where's the most potential for growth, and which targets fit with Vans equity in this case. What do we find? We found a multibillion-dollar opportunity globally that we're really excited about.
We don't have the largest share of that because we like to define our markets really big. We've got a lot of runway to grow with this target consumer. How do we make this valuable? You've heard some of my colleagues talk about this. If you know who your target is, you can put products in front of them, and they will tell you whether they like them or not. That's really helpful because you can avoid making some mistakes. We don't leave this all up to chance. There's still art in this. This is not a science that overrules all art. However, we can go in front of our target, and we learn a lot from them when we put product in front of them. We know where they shop. We know what experiences they want.
That helps us too when we know our target segment. We can focus marketing, messaging, and media to what that consumer wants to hear, when they want to hear it, where they want to hear it, and we can choose innovation investments that matter to that consumer. Shopper behavior. That's the second major fundamental platform. Why would we bother studying shopper behavior? Because there are far more shoppers than there are buyers. In fact, even great conversion leaves you a 4x or 5x opportunity, and on the web, it's a lot more than that. By studying shoppers, and if we can convert more of those shoppers to buyers, there's a huge opportunity. We talked about target consumer, and that same consumer will shop different categories very differently.
It looks a little bit complex, but in one category, they may enter and look for color, style, and brand. That same consumer may go into another category, not may, they actually do, and they may have a price and a budget and some sort of promotion in mind. By studying that kind of behavior, we learn about how to convert more of those shoppers into buyers. By the way, one of the reasons you should feel really confident about The North Face is we've completed some shopper behavior work, and there is an enormous opportunity for The North Face just by converting more shoppers into buyers, and we know how to get after that. Talked about focusing on the right conversion levers. We also guide product merchandising and visual merchandising.
We can set the level of in-store staff if we know what the economics of conversion are. We can inform promotion strategy and guide web design. A lot of things between segmentation and shopper insights that make V.F. competitively advantaged in shopper insight. Brand management. We have been adopting and adapting a lot of best practices from other industries, especially consumer packaged goods. Apparel and footwear is not at all like packaged goods, except you still have a consumer, and you can take some of those tools and apply them to apparel to add value. Three things I'm going to talk about here. First of all, how is it that we define brands? How is it that we look at marketing effectiveness and efficiency? How do we talk about equity? By the way, equity is really important.
You've heard, again, you've heard my colleagues talk about that equity is the number one thing that helps you charge a price premium, which leads to higher gross margins. It's really critical that we're managing brand equity. Brand. You can read any marketing textbook, you'll see some version of a brand pyramid. That's what we call it. We'd like to believe that ours is special. However, it's not that it's special in and of itself. It's really hard to get this right, and the process is also really difficult. We think we've developed a core competence at doing that. It all starts with a promise. What do we promise our consumer? We have this thing called the archetype. An archetype is a personality type.
For those of you who took psychology, Carl Jung identified some fundamental personalities by which you would recognize that person instantly. "Wizard of Oz" has the Wicked Witch of the West is a classic archetype. Why do we even bother with that? When you see a movie you just can't get into the characters, it's because the archetypes are squishy. You don't recognize them. The same thing is true with brands. If it is clear what archetype that brand represents, it has a lot more appeal, and we spend time studying that. What's really important here are the benefits around parity and points of difference. Talk about parity first. There are certain things that are just table stakes in any game. Maybe durability might be it. You can't be less durable on a table stake.
The first thing we try to do is make sure we are at parity with our competitors on the things that consumers expect. We have to go above and beyond. How are we going to be different and better and relevant to our target consumer? There's functional points of difference in which we also want reasons to believe. Well, why should I believe that you're different and better? Emotional points of difference. This is a highly emotional category, and we need to know that our brands have both. All of our brands have gone through a really rigorous process and keep coming back to this using consumer insight to define our brands. I'll give you, again, some really high level of examples because this applies to the most technical brand and to the most fashionable.
Roughly, The North Face promises you protection in extreme environments. Of course, we talk a lot about functional benefits, you can trust your life to our products. That's a key emotional benefit. Why? Because it's athlete-developed, athlete-tested on expeditions in extreme environments. They trusted their life, they survived, and you will too. Very strong emotional benefit. There's a lot more in The North Face pyramid. It extends to. By the way, the brand DNA is relevant to our target consumer. It also applies to fashionable brands. Our target is called the peacock, think about the promise. We promise they will wish they were you. You saw Susan's video, a very different promise than The North Face, it doesn't mean it's all emotional. There are some really strong functional benefits. We will give you a more perfect, sexy body.
How do we do that? Proprietary fabrics. Susan was up here showing you a proprietary fabric. It's part of that science of the DNA that we have that proprietary product in addition to being highly innovative. We use design engineering. We use other enhancements. Both brands, one has emotional, one has functional, they all have a very carefully determined brand DNA. I'm going to move to why this is really important. We want to make sure we give our target consumers something better and different that's relevant to them. That is how we're going to make money. The other thing that benefits all of us actually, is that our supporting functions have a consistent view of our brands. They know what the brands are trying to deliver. It's not like the list of 20 nouns and 20 verbs that you might see from a typical company.
People know what our points of difference are. You can't script thousands of people's decisions. What you can do is give them guidelines, and the brand DNA functions as a guideline. Again, it tells us where we need to improve, it is, again, about making choices for efficient and effective use of resources. Okay. Marketing effectiveness and efficiency. We started about eight years ago doing multivariate regression correlating just about everything with sales, everything having to do with marketing, but also exogenous variables like the economy. John Wanamaker said, "Half of my advertising is wasted, I just don't know which half." We do know which half, we're eliminating that half. We are working across all major brands, in the U.S., we've moved into Asia, we've moved into Europe.
What that does is it tells us what the return on investment is for $1 that we spend on marketing. I'm pretty proud of V.F. for getting here because when we started, some of the brands had strong returns, some were a little bit marginal. When you look at this, all of our measured brands today are above $1. Now, what does that mean? We spend $1 on advertising, we get more than $1 back short term, and more than double that long term. That's the way the numbers work. Now, some of our brands have a lot more. Now you would say, "Really? Why don't you just double your advertising spending and you make your 2017 goal?" The reason is, and actually if you think about it, we added $100 million in marketing in 2011.
We added $45 million to marketing in 2012 and another $45 million in 2013. This is one of the reasons why we feel really confident we're going to do that and get a return is because we are measuring the return of that. The other thing about this, why you just aren't going to double your marketing, there is a marginal return. There's a curve. We could be going up the curve and getting more, but you never know when you're going to fall below, and so we need to do this prudently and in a measured fashion. We can't just double, but you see us increasing over time because we're using these sciences. Copy testing. We know who our target is, and we know what our efficiency and effectiveness is.
We put our advertising in front of our target consumer to see whether it's well branded and it breaks through the clutter. We're doing this in the United States, both qualitatively and quantitatively. We're doing it in Asia, and we're doing it in Europe. Now here's where we're going with this. If you look at branded breakthrough and persuasion, it's pretty easy to read this chart. If I'm above average on persuasion, but I'm below norm on branded breakthrough, that means I've persuaded you to go do something, but I don't know what your brand is. We might have accidentally persuaded you to buy our competitor's product. Below average persuasion and above average breakthrough, ad broke through, but I didn't do anything about it. All the gray boxes, essentially, we're wasting money. We don't want to waste money. We want to be in the northeast quadrant.
We're going to test all our copy. Now, not every single piece of copy is tested today. We're moving to that, but a lot of it is. We're going to prioritize spending where we have breakthrough advertising. The minimum standard would be average and average. Our brands will lose permission to spend if they don't improve the ads that get tested. That means we're not going to waste money on marketing. We're going to get a return on marketing so that we can build brand equity. Now, brand equity. We measure brand equity for our major brands and our major geographies because we know equity leads to you being able to charge a price premium, which leads to gross margin. There's a lot in this, sort of a summary chart. We measure all the imagery and the things that are captured in the pyramid.
Actually, The North Face numbers here in this one particular case are real. We have a lot of room to go in The North Face, and in one core target, we surpassed a major competitor. We're making progress because we use these things and we measure all of our activities. That's brand management. I'm going to shift to innovation. Probably the biggest set of numbers I can put in front of you is this number here, $1.6 billion. When I was last here, we talked about the beginning of our innovation program. V.F. has always been innovative. However, when we decided we were going to accelerate innovation, between that point and now, we have added $1.6 billion in ideas. Now, that's a year three revenue, and it's probability unadjusted.
One of the reasons we feel confident is, for every idea that comes off in the early stages, we're adding another idea or two ideas. We're growing that pipeline. In the launch phase, there's already $400 million of products and experiences that have been launched and are on track. We feel pretty comfortable we're going to get this or more. You've heard a lot of examples about the things that are already being launched. Of course, you're familiar with FlashDry, but we also use some innovative techniques for expanding that opportunity. There's a product coming out from Bulwark. None of you probably wear fire-resistant apparel. If you did, you'd know that it was really uncomfortable, and people put their lives on the line, but they're really uncomfortable.
We solved that trade-off with a proprietary fabric, fire-resistant and comfortable, with a proprietary fabric with a special Milliken. Great partner for us, That's being introduced. It comes from this innovation agenda. I'll go all the way over to cost because you heard a lot about fit and comfort. I'll go over to cost. A lot of people are using the iPad. A couple of years ago, Vans said, "Hey, we want to be at the foreground." They're saving millions of dollars a year on sales collateral by using iPads instead. That, obviously, that's a great multiplier. There's lots more to come, too. For example, we're looking at alternative ways to make denim blue instead of dyeing it, more sustainable and quite a bit lower cost.
It surprised us because we are very efficient at making jeans and at making denim, and we have some different ideas for how we're going to make denim blue. $1.6 billion, and we're on target to get it. I'll give you some examples, You've heard some of these, I'll try not to go through them too much. Really, when we started, one of our senior execs said, "Gosh, I don't know how you're going to innovate a basic five-pocket jean." It just didn't seem obvious at that point. Worked with a technology company. We have 30 new platforms, You've heard some of them, There's more to come. There's no-fade denim. Actually, it's a big unmet need for consumers. It's being introduced across our brands. Also, we've extended, in order to increase our advantage, to comfort neuroscience and advanced materials.
There is no one better at measuring comfort than the Japanese. We have a relationship with a Japanese university around the real science of measuring comfort. Neuroscience. We're working with one of the top neuroscientists in the U.S. around beauty science because there's a lot there that you would not expect to see. We think, again, we can gain an advantage by understanding the science of beauty, both for men and for women, by the way. We're doing a lot of work on new materials, working on new benefits in jeans and new levels of benefits that heretofore no one has seen. What's in the future? More new materials, more benefits, unexpected and higher levels of current benefits. A lot more around the science of design. There's a lot there.
We're building an innovation center that'll be globally accessed by all of our jeans brands. We're going to be introducing the consumer into more and more product development because we're convinced that adds a lot of value. Retail. Innovation just isn't about product. It used to be, at least with our major accounts, winning customers control the floor. Even when you go back a little further, we didn't have much of our own retail. Guess what? It's still their floor, but we're working more closely in partnership. We're using our target consumer to reinvent the shopping space. We used our target consumer at Walmart to reinvent the women's jeans shopping space. Walmart has benefited. They've been a great partner. We've benefited, too. It's the magic of consumer co-creation of that space, using our target consumer to reinvent the experience.
We've also done that at Dick's Sporting Goods and The North Face as well, another great partner for us. In our own stores, again, we have used our target consumers and rapidly iterated a design of a store. We're yielding comps of over 40%. We feel really good about that pilot because they've been sustained now for quite a bit of time. That's the Kipling brand. Because they've earned it, they're getting the right to expand. I'll talk a little bit more about Kipling to wrap things up. What are we going to do in the future? We're trying all kinds of stuff to understand and create the future of retail. Virtual try-on, we're experimenting with that. Experience at retail is going to get highly elevated. We're working on that. There's a lot of things happening around the globe around trends.
We're trying to put that into our stores as well. We're experimenting with big data, experimenting with voice-driven search on the web, looking at unconventional locations. You are going to see more and more unconventional locations. We took an idea out of a Korean subway where consumers could aim their phone at a wide array of groceries and then pick it up when they got home. They paid for it, chose things. We said, "Gosh, we can do this with apparel." We tried this on a Nautica brand and learned a lot. We think we can apply more unconventional locations in the future. Communication. I talked a little bit about how we're measuring marketing. Again, advertising was an art. We found that we can greatly inform the art by talking with our consumers and actually using them to help co-create our advertising.
The artist hasn't lost control, the brand hasn't lost control. The consumer is now contributing. We're really going deep on a benefits focus. The way we think we should talk about benefits is often not what the consumer wants to hear, or it's not even what they understand. We're using consumer co-creation of benefit expression. If you've seen the You versus Me commercial, we use that technique for that. A breakthrough ad and really led to a lot more business for us. We're using that on a number of brands, and we're seeing higher sell-through as a result of that breakthrough advertising. In the future, a lot more science. There's a lot of science around how we choose things, and we're going to be using that kind of science and much more consumer co-creation.
Earlier in the innovation process, actually, I have a team out now, been to the United States and India and China. Probably they'll go to Brazil and then Europe to understand an entirely new benefit in denim. It's been very surprising. It's not what we thought it would be, a big idea when the consumers put it in their own language. How does this all come together? Here's a little case study really quick. Eric asked the question in his inimitable fashion, when Kipling was about $200 million, he said, "How do we get this brand to $1 billion?" Not an atypical Eric question. That sent us on a pretty significant journey to really go through this process of choice making, to say, "What countries should we go to? What countries should we not do?
What channels, what go-to-market changes?" A lot has changed in that. It also started with consumer insight, global consumer insight to identify the core Kipling consumer, what we call the Imaginista. Not that that would mean anything to you, but it means a lot to the people who run the brand. She's not a slave to fashion. She's a very different kind of person. She's on the go, generally has a family. Because she's on the go, she wants a light bag that's well-organized, and there's a lot more behind that. We use that to craft our promise to her, which is to lighten the load of your day. That's physically, emotionally, mentally, and it's in keeping with the mischievous spirit of the monkey. There's a lot more in there, carefully crafted brand DNA for Kipling, that we know is a large, multi-billion dollar segment.
Last, one of the things it helps us to do, and again, this is all about choices to be effective and efficient with resources. We talked about the consumer co-creation of retail formats, but even within innovation, highly focused innovation investments. We own crinkled nylon. We're innovating within crinkled nylon in different kinds of fashion. We're searching right now with a technology firm for a super light, durable fabric. They could have invested in all kinds of stuff. The point is, we're investing in the two critical things that we know will matter. Did we get to the $1 billion? We eventually will. However, in the next few years, we found $400 million that we know we can get over the next five years. Most importantly, we have very high confidence and specific plans to get there, and the entire team will get there.
We'll eventually get it to $1 billion because Eric is relentless. We know we're going to get that $400. We know that brand could be $650 sometime soon. I just want to leave you with the thought that we have the people, we have the brands, VF has the resources, and we have the tools, which are all the reasons you should believe that we're going to make those 2017 numbers. Thank you.
At VF, direct-to-consumer is a huge part of our growth strategy, and internally, we talk about Project Digital Excellence, which includes operational efficiency, a consumer platform, social platform, and mobile. Really, Project Digital Excellence is building all of these different capabilities into a common platform that can be leveraged across all of VF.
The digital excellence strategy is really a set of capabilities, best practice, organizational structures about how VF is going to win in the D2C space going forward. There are a number of powerful platforms that these brands can tap into, but it's still all about telling the brand story, of getting the product there for the consumer to see it, view it, and buy it.
We've had a lot of success around mobile. Most recently with the launch of The North Face direct-to-consumer app, which has been critically acclaimed as well as really well-received by consumers. Those reviews in the iTunes Store and the Google Play Store have been fantastic. The strength there is to take the learnings from that app and leverage it out to the other brands. Applications is just really one part of the story and when it comes to mobile optimization. Mobile optimization for us is implementing responsive web design across all of our brands.
We want to make sure that we have the right technology with the right look and feel, the right storytelling for however that consumer wants to engage with us on whatever app or whatever device, to make sure that we can connect with the consumer in the way they want to connect with us.
Another initiative that we're really excited about is our omni-channel initiative, and it's a really important growth channel for us going forward.
What that means from a VF standpoint and what it's going to mean from a consumer standpoint, wherever we have inventory and product, whether it's in a store or whether it's from a distribution center, we're going to make that available to the consumers going forward.
Yeah. As an example, if you're in one of our retail stores and that item isn't available or quite simply isn't carried in that retail store, you'll have access to that inventory or that style wherever it lives.
Another component of the digital excellence strategy includes a customization component. An example of that is at Vans, where a consumer can go online and design all aspects: color, trim, lace, and make a shoe that's unique to them.
This is a part of the business that we're really excited about because it captures a trend of a pull versus a push. There is a shift where consumers want the ability to create what they want and have it delivered to them.
From a platform standpoint, as we've built customization tools, we are now able to leverage that going forward, there's plans to roll it out to additional brands as well.
I'm really excited about the digital component of our direct-to-consumer platform. It is our opportunity to connect with consumers, as we get closer and closer to those consumers, the opportunity in front of us is huge.
We see the digital excellence strategy as a key enabler of how we're going to make that work, how we're going to drive closer connectivity from a consumer standpoint. We're very excited about, A, where we've been, but even more excited about where we're going here.
Good morning, everyone. I'm Mike Gannaway. I have the privilege of sharing with you our direct-to-consumer business in a bit more detail and our five-year plans. I also want to just comment a little bit about the video. Project Digital Excellence, I'm going to talk about more later, but it really is a key enabler that will help us win in the digital space and an example of how the D2C platform is leveraged across brands and across geographies. In 2006, we first declared a strategy of building direct-to-consumer. In our previous 100 years of history, we never talked about that. It was new for us. I'm proud to say that six years later, in 2012, we delivered $2.3 billion in sales in direct-to-consumer. That was 21% of revenue. Our plan is to build that direct-to-consumer business to $4.4 billion.
That's a 14% CAGR and will represent 25% of V.F.'s business. Certainly, it's a strong plan, but it's one we're comfortable with because these are the kind of growth rates we've experienced in the past five years. We've added capabilities I'm going to share with you that help us feel confident we can deliver the same kinds of trends in the years going forward. From a geographic standpoint, we'll see double-digit growth across regions, a strong 12% growth in the most mature market, North America, 15% growth in Asia. Remember, owned stores are just a component of the China strategy, which is very heavily a partner store strategy, and very strong growth in Europe as our stores and our online sites begin to mature. From a channel standpoint, we're focused most of our energy on full-priced channels.
During 2012, full-priced represented 62% of our direct-to-consumer business, 51% was in stores, 11% was in e-commerce. We'll continue that focus on full-price stores, and as we look at 2017, we'll have about 69% of our total business done in full-price channels. Full-price stores maintaining that 51%, 52%, and the big move and the big change is in e-commerce, which we expect to grow at 25% CAGRs. Just a comment on e-commerce, because one, it's our fastest-growing channel, and two, it is our most profitable channel. I want to put a little bit into context about where we are today and where we see it going. At V.F., we were late to the party relative to launching e-commerce. It wasn't until 2008 that we really started to focus on it, first in North America.
I'm excited to say that with the launch of JanSport.com just last week, we now have all of our major brands in North America with live e-commerce sites. We started focusing on e-commerce in Europe a couple of years ago. We are still immature. In fact, our Vans business across Europe has not yet been annualized. In Timberland, we have a site only at the U.K. We still have Europe to expand to. Wrangler and Lee are waiting in the wings in terms of their chance to launch online. Very big opportunity in e-commerce in Europe. Our guys have done a good job to date. We've made good progress, but tons and tons of opportunity. In Asia, we've just begun. In China, we have The North Face, we have Vans, and we have Timberland up on sites with Tmall. Again, just starting.
Tons and tons and tons of opportunity. Our plan is to triple our business to get to $750 million. Again, that's a 25% CAGR. I will also say that there's so much moving in the e-commerce space, there's so much activity, and there's benchmarking that we did that has indicated perhaps there's even upside against that kind of a number. I've talked lots about commerce, and I'll get back to commerce, but I also want to talk about D2C in context. The growth driver within V.F. is called Serve Consumers Directly. It's about creating connections between our brands and our consumers, connections including those in our stores, full price, those in our outlet stores, those in e-commerce, but also all the tools and the digital connections.
In the end of the day, at V.F., we're different, we think, because we don't think of ourselves as retailers, or we don't think of ourselves as just retailers. We think of ourselves as brand builders who use direct-to-consumer stores, online sites, as well as all the digital tools to connect directly with our consumers, to build relationships, to build loyalty, and ultimately, to increase the value of that customer and brand over the lifetime of that individual. It's a subtle difference, thinking of ourselves as brand builders as opposed to retailers. It's subtle, but it's significant in driving decisions we make and investments that we make. We're about connecting with consumers, utilizing D2C tools. Let's talk about our three growth strategies. Continuously driving comp store growth, accelerating e-commerce, and opening the right new stores and the right brands and the right geography to fill out our footprint.
These strategies may look familiar to you. They are the same strategies we used and talked about two years ago, and the same strategies we talked about two years prior to that. They are the fundamental strategies of direct-to-consumer growth. We maintain our focus on these and our focus on increasing our capabilities and focus to execute. First, perhaps the least sexy and least inspiring of them, but certainly the most important, is driving continuous comp store growth. When we say continuous, we mean year after year. It is the lifeblood of D2C profitability and productivity, and it's the basis around which the rest of the strategy grows. We have a relentless focus at V.F. around driving comp store growth and unwavering focus on the key performance indicators that drive that growth.
These KPI indicators are important to every store manager we have up to the organization, to the CEO. We stay focused on them. We measure and we drive strategies against driving traffic. We drive activities around and measure our performance against increasing conversion rates. We build strategies and measure our performance around building basket size and the tools to help do that. It's about the brands, it's also about building strategies and processes to continuously improve our performance against these KPIs. Unwavering focus against them as the most important element in our direct-to-consumer strategy. A strategy is to accelerate e-commerce. I talked about the numbers. I want to talk a little bit more about it in detail and give you some ideas about Project Digital Excellence, which is what my colleagues began to talk about originally.
I mentioned we are immature in e-commerce and thus immature in some of our digital capability. We asked ourselves over the year, what would it take? What would it take for V.F. to leapfrog to leadership in e-commerce and in the digital space? We asked ourselves that question. We said an answer to that might be fruitful because this is our most profitable category of business. Growth here is tremendously accretive. What we did answering that question, we took a small group of individuals across functions and across brands and dedicated them to answering this question. We went outside because we quickly discovered there's no single playbook that's yet been established. There's no single answer to how to get active winning in the digital space. There are answers all over the place, and we went to look for them. We talked to agencies.
We talked with consultants. We talked with the industry. We went to Google. We went to eBay. We talked to other retailers about how they were thinking about the digital space. The goal was, how will we make a playbook to help V.F. win? From that work, we created a vision for ourselves, a digital vision. Through benchmarking, we defined the size of the prize. How big should the V.F. brands be in e-commerce? How big can they be by region? We socialized our thinking and interacted with our brands to make sure we had brand input and brand buy-in to the notion of how are we approaching this. Next, we defined and looked all around to say, what are the functions that define the digital space? What are the activities that define the digital space? We defined 75 of them, 75 individual activities that define the space.
We organized them around six categories. We put a header around it, but the key is the 75 functions. We looked in the industry and talked to experts about what are the best tools and capabilities existing within those 75 functions by which we could identify. That became a body of work, which is the first input of the Project Digital Excellence, which is, here is what winning looks like in 75 functions. This winning in each of these functions drives not only consumer connections, but results. The next thing we did, and we just finished this recently, is we asked the brands to self-assess themselves against excellence in each one of these 75 functions. The answer to the question is, are you doing it, yes or no? Are you doing this well, yes or no? Which partner are you doing it with?
We've ended up with quite literally a map by brand of where we stand against world-class. The summary points, which is the summary of 75, include things like site processing, the customer experience, marketing, social, fulfillment, customer service, usability, and finally, omni-channel. That the outer rim on these graphs, and these happen to be examples from Vans and Timberland, the outer rim is world-class by our definition in terms of performance. The inner rim is our own brand's self-assessment as to where they are relative to that standard. The beauty of this as we see it is that not only is it clear we have tremendous opportunity across our brands, more importantly, it's clear what we have to do. Our brands are now, as we're speaking, beginning to build roadmaps, prioritizing. They'll look different by brand because we have different target segments. We have different priorities.
Each of our brands is in the process of building a roadmap, bringing them to their state of excellence. We'll measure on a quarterly basis how we're doing against this. Obviously, we measure our results from a financial standpoint daily and weekly. This is a tremendous opportunity for us, big opportunity. Most importantly, is in a space that's kind of crazy and wild as the digital space is, we've defined a path of action for our brands. Just to comment, one of the payoffs is omni-channel, was mentioned before. Omni-channel is the end of the day kind of the payout. It is, in fact, the strategy to have consumers at the center and let consumers touch us in any way, and we end up with one view of them. It's about inventory anywhere, so I can satisfy a consumer from any channel.
It's about employee-assisted selling, that I can get data, information about products, about events. It's about a single view of the customer that we know you when you shop with us in-store, online, and with your permission, your social behavior. That leads us to an opportunity to do one-on-one marketing, which ends up building relationships, building loyalty, and enhancing the value of that lifetime relationship. Lots of opportunity. We're tremendously excited about the e-commerce opportunity, not only the e-commerce, but also the digital tools that drive connections and drive future business. The third strategy in terms of growth is about opening new stores. All of you know that at V.F., you would expect we have rigorous standards in terms of financial approvals for our new stores. Don't need to go into that. You can assume what we already have.
What I do want to do is talk a little bit about informed site selection. Stephen talked about the science of marketing. This is the science of site selection, and it's a tool that we've begun to use or we are using. We developed in North America. We're going to begin to use it in Europe, and we'll use it in Asia when the data becomes affordable and more meaningful. It starts from, as Stephen talked about, it starts from the target consumer. Each of our brands has a very clear view of their target, a very clear view of their segments. That's where we start. You can imagine the difference between the target segments of Vans and 7 For All Mankind. Very different. That's where we start.
They're turned into segments, as Steve has said, there are tools out there that tell us where those segments live at the household level. We start from target, moving into segmentation segments. There are tools available that we use that tell us where that customer lives. We add to that a growing database of e-commerce users who have given us their address, so we know exactly where they live. The combination of those things, plus others, give us a very good indication of where our stores should be and when they're there, how much they should be producing. I've oversimplified a very complicated geo-demographic kind of activity, but I think you get the message. A point as an example, we'll use Vans Atlanta. Steve talked a little bit about Vans before. We actually did this. This is actual behavior.
Vans came to the geodemographic group and said, "Gee, I want to get a look at customer segmentation across the U.S. Where do my customers live? Where is that concentration of my customers, and where should I be prioritizing my next market rollout?" You can see red is the big indicator of density. Red, orange, yellow. You can see where the maps are, where the marketplaces might be. Orange County, Southern California, the big orange. Various marketplaces that we are either considering in or in the future. The value of this tells us where we should be prioritizing markets. It also tells us how many stores likely we can have in a marketplace, which helps us define how many stores we can have in a market. Let's go to Atlanta, which was the target site. This represents our actual e-commerce customers.
As we thought about entering this market from a retail standpoint, we already had a large number of e-commerce customers. You start to notice, you see this map, clusters of where they live, which might be an indication perhaps of where we should be putting our stores. We add to that the segmentation. Where do our targeted customers live? This is where blue is the strongest, then dark green is the second. You start to see there are clear pockets around the Atlanta Metro, where there are heaviest concentration of the Vans target consumers. Really good indication of where you might be putting stores. We end up overlaying the two things together, plus a few other inputs like adjacencies and competitive sets.
We end up with maps that show you and begin to cluster target segments of who may or may not be current users, e-commerce customers who are current users, to help us identify where the stores should be very clearly in a scientific way. Of course, there is always an art and science. The art means what corner should it be on. The science says what neighborhood it should be in. In the case of Atlanta, we launched a market exceeding expectations. This is a skill set, as I said earlier, that we're fine-tuning using across North America, beginning to introduce in Europe. Greatly helps our brands make the right decisions relative to stores and store locations. Talking about stores and store openings. On the screen is the indication, a listing of stores by brand.
For VF, we finished the year at 1,129 stores across 14 format brands and across the globe. Notice that there are only two brands that have more than 101 stores globally. It was very clear that if you have less than 101 stores globally, that you've got lots of runway for store openings during this five-year period and the next five after that, without there being cannibalization or being overstored. It's also true that Vans and Timberland, which are our largest store count, I want to point out just an unusual opportunity that we can see and understand. Steve talked about Vans. Vans has a very strong presentation on the West Coast, moved to Texas, Florida. Just recently opened New York, room to move in Boston, Philly, down to Washington. It leaves wide-open space in the South and the big markets of the Midwest.
Vans has plenty of runway for opening new stores, even in its biggest market. Timberland in U.S., we've indicated on this slide that we have only 14 full-price stores in the United States with Timberland. Clearly, lots of runway to move. Currently, 67% of our stores are in the Americas. 33% out of this country, 23% in Europe, 10% in Asia. Our plan over the next five years is to open 640 stores net. That's about 130, exactly 130 stores net per year. In order to get to that 130, we'll probably open 150 and close 20 as we continuously freshen up our portfolio of retail stores. That's a pace not unlike we've been running at the last number of years.
Our expectation and our plan is that 65% of the new stores will be outside of North America, 35% of them in Europe, 30% of them in Asia, as we continue to build out our footprints in those important marketplaces. Three key strategies. Key strategies that we've been at for a while, that we're adding capability to our own portfolio, and that we're getting pretty good at. I just wanted to talk about how we do this. It's been mentioned a couple of times before. These D2C businesses are the brands' businesses. They are the execution of the brand strategy, and these businesses, organizations lie inside the brand. It allows everybody to have laser-like focus. It's about The North Face. It's about Vans. It's about Timberland. At the same time, we have a tremendous opportunity to leverage ourself, leverage V.F. where it makes sense.
On the front end, we work hard to leverage V.F. relative to best practices, relative to gaining consumer insights. On the back end, we obviously leverage for cost and for productivity where it makes sense. We organize ourselves in a council process. We have a D2C council regionally that sets priorities and makes decisions relative to its own activities and priorities. We have a council in North America. We have a council in Europe. We're developing a council in Asia. They're all tied together by a small group at headquarters that works with all three of them. Clearly, the secret sauce, which is to drive brand focus, but leverage V.F. at the same time. In summary, our plan is to grow our business by 14% CAGR to $4.4 billion.
We are really, really confident we can deliver those results because, one, we have powerful brands that we work with. Brands, frankly, and what Stephen said and Karl-Heinz said today, that have never been stronger. We have organizations that are focused like lasers on the three key strategies of driving comp store growth, accelerating e-commerce, and opening the right stores to fulfill our footprint around the world. We're also confident because these same kinds of growth rates we're looking for in the future, we've done in the past years. With continued enhancement of capabilities, we're confident we can deliver them in the future. Thank you.
The supply chain is very focused on trying to have the right product at the right moment when the consumer is ready to buy. Having that product on the shelf is all-important to us to satisfy the demand and to delight the customer. In the case of the Vans business in Europe, we started to see the signs of the business taking off. We're forecasting a 20, 25, 30% sales growth, and we blew past that.
The Vans brand in Europe has grown tremendously in the last three to four years. We've developed a growth strategy which we applied to U.K., and we saw tremendous success. Currently, we're seeing that all the other markets, Germany, France, Italy, and Spain, they're seeing tremendous growth currently as well.
In order to maximize the business, we wanted to have two streams of product procurement. The traditional stream, where you go to market, you book in all your orders, and then you go to Asia to produce it. Additionally, we also wanted to have a never out of stock supply chain that gave us the opportunity to quickly dip into the sourcing engine and pull product forward when things are hot.
When you see growth like we are seeing right now, it is super important to have that supply chain team next to the rest of the team.
That intimacy and the fact that they're literally all sitting amongst your office and your team and the real-time conveyance of information back and forth, up and down the supply chain is a strategic decision that has great benefit in having us be nimble and reactive to what's going on in the marketplace.
Having the supply chain next door means flexibility and speed to market.
We maintained a mid-90% on-time delivery to our customer through the entire 24 months run, run period. We also reduced our air freight expenditure at that time more than 40%. We ramped up the never out of stock engine, the combination yielded beautiful margin for the brand.
If we were a standalone brand, if we were not a part of V.F., we would have never been able to deliver this growth.
Going forward, we have more tricks in the toolkit that we'll bring online in support of the Vans growth. Good story in the past, and you're just going to keep the band running.
Even better for the future.
Yeah.
Hi, I'm Tom Glaser, President of the Supply Chain. Tell a little story about that, the story in Vans. I was with the Operations Director that works beneath Peter. In one particular quarter last year, they had a triple-digit increase in revenue and a fantastic bottom line. I told him to frame it and put it on his wall because he's probably not going to see that again. It was a pretty amazing story.
I was going to break my conversation today into two parts. I'm going to give you a little bit of a tour of V.F. Part one is just to give you a little bit of sense of the size and scale of our business, updates on some of the facts and figures to give you a sense of what we deal with every day as a team. Second part, I'm going to talk through some of the things in our playbook. We have a very thick playbook of things that we work on as a team to execute this fantastic growth. I want to share a few that I think are a little bit different from others. Let me define what the supply chain is for V.F. Many companies define supply chain as basically logistics and distribution. We think of it very broadly.
My teams work on demand planning and forecasting, supply planning, where we make the stuff, the raw material procurement for both our own internal manufactured things and the things that we source, because we generally specify everything from zippers to raw materials to the threads that we use, the manufacturing and/or sourcing and what's that make-buy decision, what's the best place to get our products, the quality control that we need to put the right products on the floor, the logistics moves, the distribution centers, and finally, the customer service. Around that, we wrap around all the metrics to be able to measure that and to be able to give back to the business so they can make the right decisions for the future. That's the supply chain definition for V.F. We make a fairly large amount of stuff, 486 million units.
That gives us scale all over the world in a number of different product categories. Since we've been sitting in this room together, I estimate that we've made about half a million units worth of items to ship to our consumers. On top of a lot of units are a tremendous amount of style color. Okay? We estimate about 760,000 different combinations that we produce every year, and we produce them in many different product categories, from chef coats to aprons to work wear, socks, tons of shoes, handbags, and even a couple hours from here, we have a domestic plant that makes on-field baseball uniforms. I believe one of the things that V.F. does very well compared to our competition is managing this level of complexity. As we look forward in this industry, I see we have to embrace complexity.
We've got to be able to supply that to them. We also have 29,300, actually 29,333 fantastic associates in our supply chain. Check out that smile of one of our workers in the Dominican Republic. It warms my heart when you see people come to work every day with that level of enthusiasm. We also are very different from many of our peer group companies. One of the things that makes us different is the fact that we make a fairly large amount of our own stuff. We have 32 manufacturing plants throughout the world: Mexico, Honduras, Nicaragua, the Dominican Republic, Argentina, Turkey, and Egypt. Making work wear, making footwear, making Jeans wear, and we think this is a really big differentiator for us. We estimate about 30% of our products are made internally, 70% we source.
The big advantage here for us is a couple of things. One, we make our own things. We generally, when we make them, we make them at a lower price than we can source them for. Generally, when we make our own things, we make it faster than our competition, allows us to give better inventory service, better read and react capabilities for our consumers. Finally, because we know how to make our own stuff, we have this capability. We call it hard skills. We know how to engineer products, engineer plants, and build plants. We know how to make our own things. When we apply those capabilities to when we do choose to source, it gives us a great advantage because we know all the components of how things are made. In our sourced environment, we operate in about 40 countries throughout the world.
Over $3 billion at FOB at first cost. Again, very great scale. We estimate we work with about 2,000 different factories on any given day. That's a little bit about the complexity. Some more facts around our manufacturing capability. We're the world's largest jeans manufacturer. We're the largest producer of garments in Central America. With the addition of Timberland into the fold, we're one of the largest footwear producers in the Caribbean. Some more facts for you. We buy about 600 million yards of fabric per year. That's enough to wrap around the equator 13 times. 317 million zippers means we zip up about every American every year. We also have quite a few distribution centers, 32 throughout the world. They're well-positioned to be able to support all of our various businesses.
In the last year, this year, we'll actually bring three new distribution centers online, one in Hackleburg, Alabama. I don't know if you recall, a couple of years ago, V.F. tragically lost a distribution center in Alabama. We're really pleased and proud that we were able to rebuild that plant in that small town. We're thrilled. It's a brand-new facility. Should last us for years, and it's terrific. In addition, to support our international businesses, we're bringing on a new distribution center. It started actually last week in Belgium for our North Face business, predominantly in Europe. We're beginning to ship merchandise, touch wood, if you're in my business, distribution center is hard to open. It's working fine. In the third quarter of this year, we're opening up a new distribution center just out of Shanghai, China, to support Aidan's business.
Again, a great enabler for business to give us better capability to service our customers. We also ship about 68 containers, 40-footers per day, I'm sorry, which means that over the last few hours, we've shipped about 12 containers worth of items that are coming back either to the U.S. or Europe or in Inter-Asia. We also manage a tremendous amount of data and orders. We estimate that we manage about 38,000 replenishment orders every day that come into our system, which is about 14 million per year. In any given point in time, the VF systems are managing 750 terabytes worth of data, which is 95 times greater than the printed material in the Library of Congress. Even though we have all this data and you guys are sending plenty of emails today, we are not tracking your emails. Okay.
That's a little bit of the facts and figures around our supply chain. What I thought I would share with you is some of the things that we do well that create competitive advantage for us. I'll go through them specifically, but they're global balance, our manufacturing, again, hard skills, what we call The Third Way, which is, I think, a relatively unique way of how we deal in the sourced environment. Our ability to integrate acquisitions, very critical for us, and our planning and operations capability. We believe these five things, plus our entire playbook, give V.F. great advantage in gross margin, in service, and in inventory management and control. Let me move on to global balance.
One of the things you'll notice here if you're sort of a student of the industry, which I am, I track trade figures monthly, is that V.F. marries up very different from our competition. Most of our competition sources in China, as we do. We produce about 21% of our units in China every year. The industry produces over 40%. For Japan, it's much higher than that. For Europe, it's actually higher than 40% for Europe. We think this positions us very well relative to our competition. You can see in Mexico, 22% of our units are produced in Mexico, primarily in our own facilities, but we also source in Mexico. Overall, V.F. makes about 40% of its goods in the Americas, while our competitive peer group companies produce about 20%. I think that gives us advantage in two ways, okay?
Actually, I would say three ways, because I think our manufacturing is competitively advantaged on cost. Obviously, it's competitively advantaged on speed. Also, it gives us an advantage on positioning relative to China. That discipline for us as being disciplined about where we make our goods, has served us well. Let me just take an intermission here because I know you guys, if you're tracking our industry, talk a lot about China, as we do too. China, again, has about 42% market share to the U.S., a little more for Europe. We are anticipating that costs in China are going to go up disproportionate to the rest of the industry. We don't know when that will totally occur. It's occurring today.
They're still holding on to market share, we anticipate over time that their market share will go down, that companies like ours will reposition themselves out of China over a period of time. China is still a fantastic place to make goods. There's no other China other than China. It's going to be a repositioning that occurs over the next few years. I think, again, we're well positioned to make that happen. In our industry, we do believe that there'll be a little bit more inflation than we have seen somewhat in the past. We had a very high deflationary period. We had the period of the cotton crisis, which drove up a lot of inflation. We since right now are seeing prices pretty flat, but we're anticipating in our modeling to see low single-digit inflation go forward, predominantly driven by China, who's now exporting inflation.
That's a little bit on China. Again, I talked about hard skills and our ability to manufacture products. We manufacture a tremendous amount of Jeanswear today and workwear products in our own facilities. One of our strategies over the last few years has to take our lifestyle brands and put them into our own factories. We just started to make The North Face in Honduras at the end of last year. We're thrilled about the progress we're making there and look to be able to expand it. Again, better cost and better speed. We're very pleased with the Dominican Republic factory that was part of the Timberland acquisition, sort of a gift with purchase there. We think it's a great facility. We look to double the size of that plant over the next four or five years.
In fact, you see that picture of a robot there. We just invested in robotics for that particular facility, which should give us better quality and better productivity. I think a really great case study is Susan's business, where we took a lifestyle brand, very fashion-forward, and figured out what could the supply chain do to support that business. One of the things we decided to do was internalize our own production, which is very unique in that particular business, where I think every other brand is fundamentally sourced. We brought in a manufacturing team. We do most of the cutting in-house. We do a fair amount of the other activities around manufacturing. We choose not to make 100% because it's a very variable business. The key for us is to be able to understand to produce a base level.
That gives us better cost. In this particular case, the whole supply chain playbook applied to the 7 For All Mankind business enabled us to get $11 million out of the business sort of we started to work together. Also gives us the visibility to what the other people's costs in that marketplace are. If you know what the workers are making and you know what the YPD, which is the amount of yards it is to make a jean, and we know all the trim card, we know the full bill of materials. Clearly, we have a real advantage of understanding that cost, and that helps us work with our partner factories. At the same point in time, we were able to improve the quality and the fit. Probably most important for Susan's business, that we were able to make it faster.
It's a very fast business. Today, we're able to go from sort of a flat-footed start, "This is kind of what we want," to putting goods on the store shelf in about 35 days, and we think there's even opportunity to improve on that over time. It's a big challenge for an organization to shift its mentality to be speed-driven. We're really confident we can make improvements there. That's actually a picture of Barry, who's the president of Seven, with the factory that we have in L.A. right behind him. One of the other key ideas that we've been working on for a number of years, some of you may have heard me talk about this in the past, is what we call The Third Way.
Let me quickly describe that for you, then I'm going to kick it over to a video and let you give you some more explanations. The First Way is what we've done for many years, is our own internal manufacturing. We've done it for over 110 years. We've done a lot of, again, jeanswear and workwear, and we're expanding that into our lifestyle businesses. Okay? The Second Way was how I really entered the business, which was in a transactional source environment where you put together a PDF package, PDM package. You'd go over to Asia, you'd work with a series of factories, you'd get a counter sample, and you'd book the goods. More of a buy-sell relationship. What we're working towards is what we call The Third Way. What sits in the middle there?
How can we use our manufacturing capabilities on one side, how do we maintain the flexibility of sourcing on the other and marry the two together? Again, we have a full array of things that we're doing. We have a light version of this, we have a medium version of this, and a heavy version of this. The light version is more of just an engineering with the factory and production planning, which is actually a capability that Asia needs to improve on. The heavy version is an actual purpose-built factory for V.F. where we produce our own merchandise. Rather than go further than this, let me just kick off the video, and my team will explain a little more about what The Third Way is about.
At V.F., we've created an innovative manufacturing process that we call The Third Way. We work in partnership with factories around the globe to leverage our expertise and their facilities to manufacture product more efficiently. The First Way refers to V.F.'s owned internal manufacturing division. These are our wholly owned factories, which we have in Mexico and Nicaragua. Second Way refers to sourcing and contract factories, which are mainly in Asia, but also in the Western hemisphere. Here in Bangkok, we're utilizing a heavy Third Way process. We are putting our engineers in the factory to help the factory become more efficient and more cost-effective.
For example, a lean manufacturing sewing line would be set up with a small parts assembly area at the beginning. In towards the middle of the sewing line, we would start the single-piece lean manufacturing system, which means that you have single pieces traveling down the sewing line on a conveyor. Each person has their own role to play to assemble this product. The work in process is very low. The flexibility is very high.
The benefits is, The Third Way provide order consistency for our factories, and also V.F. provide a lot of technical and engineering supports that will makes the factory easier to acquire the knowledge of all the various brand that V.F. owns. In that way, instead our factory have to get the knowledge themselves, they have the support. That's a good way.
V.F. incorporates our light Third Way technique in Indonesia with one of our key vendors named Hojin. In this factory, we have our engineers working with factory management to reduce their waste in fabric, in materials, and improve their utilization of containers. We're reducing fabric waste by implementing a new software called ShapeShifter, which allows us to make tighter markers. By making a marker tighter, we can use fewer yards to make the same garment.
One way this is significant is in improving our overall fabric yield.
By improving our fabric yield, it's a huge sustainability initiative, because not only does it allow us to purchase less fabric, but allows us to reduce our freight cost, which uses less petroleum. Since our fabric is synthetic, it also reduces the amount of fossil fuels that we're using in our fabric. Translates into big savings for V.F. We save between 4%-5% on fabric alone.
V.F. now uses a program called CargoWiz, which is a container optimization software. We use this software to determine the current dimensions. This is the way how we optimize the container usage.
These measures aren't just about environmental responsibility. They result in profitability and cost savings around the globe and throughout the product line, while helping us create the best possible product for the consumer, and ultimately inspiring many more adventures.
I can't think of another lifestyle apparel company that can do what we do around these ideas of The Third Way and what an advantage it could create for us. I'm going to give you another case study. This is actually a mock-up of a factory that is currently from a green grass factory, currently being built for V.F. in partnership with our engineers and our sustainability teams, actually in Bangladesh. To allow us to begin this year making a few million units of Jeanswear and end state in a few years, go up to 9.5 million units. Our team helped design the building. It'll be designed to our specifications, and I think it'll be a great example of how we can take the best of both worlds from the source environment, working with partners and our own capability as a manufacturing company.
Maybe I'll just take a minute here and talk about Bangladesh. It's been in the news of late, and not directly related to our products, but it's been a tragic situation at some of those factories. We are going back as a company. We've always had very rigorous standards around what our plants are like and what the social environment is in the plants. We're going back and revisiting all of our strategies. We're going back and revisiting the engineering. We're back and revisiting the physical plants. It'll take us a little while to do that. We do want to make sure that we're safe and secure, and we're also working with various industry groups to do the same thing. Another case study is Timberland, and it's been a fantastic acquisition for V.F. It's been a lot of fun. It was our biggest acquisition.
I was engaged, along with my team, in how to make that work within VF. One of the things we immediately did was sat down as a group, the Timberland team and the VF team, we decided what talents we needed to do, what capabilities did we want to bring together. One of the things that we did is we embedded some of our key talent into the Timberland machine. It's not that their talent wasn't great, but we do want to run as a company and run the same way. We began to harmonize our operations process, how we looked at inventory, how we looked at gross margins. We also added manufacturing executives to their facility in the Dominican Republic. We connected those teams together. We set common goals.
In the case of actually footwear, I don't know if this is a term or not, I'll call it reverse integration. In Asia, Timberland had a much bigger footwear business than we did, we bolted onto their machine. We started to use a lot of their particular factories. We started to use their processes, we had a win-win. We helped them on one end, and they helped VF on the other end, I think that's when it really works well when you can do that. The results have been pretty good. On the apparel side, which is clearly a capability of VF, we were able to bring that in from a third-party agent. We were able to bring that apparel business into our facility, we were able to save 10%. We were able to improve our service and improve the quality.
By applying our operations playbook, we were able to take inventories down 30%, actually, from the base year to the next year, we saved $7 million in air freight, which is a nice number. Overall, we looked at leverage at every possible focus. What do we need to do around materials? What do we need to do about people? What do we need about building assets? We were able to take $30 million out of the Timberland supply chain. On top of that, though, because they did some things much better than us, we were actually able to take $10 million out of the VF supply chain in the learnings that we applied from Timberland.
Finally, I mentioned it earlier, we're excited about expanding the Dominican Republic factory from about 2.5 million units to 5 million units over the course of the next few years. My final plank or my final item that I think VF does very well, it might at times seem like the boring stuff. It's this operations rigor. I think great companies are very focused on what they measure, what they get done, holding people accountable, VF does a very strong job on this. From the cash perspective, we focus on inventories, we focus on distress. From a cost perspective, we look at our operational costs with great rigor. We're obviously very focused on our gross margins. From service, we strive to have the best customer service in the business, in full and on time.
From the perspective of how this particular plank particularly worked, I'm going to use the example of Vans, where Peter and Jan came in. There was nothing really particularly special that was done there other than getting together, working together, putting the playbook together, commuting that to the Asia teams, executing it and having that level of growth. I can't underestimate how particularly important this is, and we're continuing to double down on this. We're trying to improve our processes. We're launching more capability around sales and operations planning as we go forward. It's one of the key things that I'm working on. In summary, okay, if I could leave the words that we have an unparalleled competitive advantage compared to many of our peer group companies. Our ability to manage complexity, the world is going to get more complexity.
We've proven it in the past. I'm very confident we can even do better in the future. Our global balance really helps us maintain our risk, again, much better than some of our peer group companies. I think talking about China limits our risk in China. Our hard skills allows us to get being able to be in manufacturing, allows us to get lower cost and faster speed to market. Finally, our focus on operational excellence has continued to maintain very low inventories overall and high levels of service. Finally, I'd say our last really big secret weapon here is I'm proud to work with 29,000 very talented people. Everyone from operations managers, again, to people who work in our facilities, to people who work in our distribution centers. Thank you for your time today. I hope the tour was beneficial to you.
Ladies and gentlemen, lunch is being served in the VF Gallery on the fourth floor. You can use the stairs or either of the two elevators to get up there. The lunch break is 45 minutes, please be back at 12:50. Thank you.
Look into my eyes, can you read my mind? Look into my eyes, can you read my mind? Look into my eyes, can you read my mind? Look into my eyes, can you read my mind? Look into my eyes, can you read my mind? Look into my eyes, can you read my mind? Read my mind. Read my mind. Look into my eyes, can you read my mind? Look into my eyes, can you read my mind? Read my mind. Read my mind. Read my mind.
You put me down to your friends. You claim that I'm no good. You say that I don't do the things Again. Do it again with no regret. What more can I do? Oh, why you treat me that way? You know it ain't right. Why you treat me that way? I don't want to fight. You're so hard to please. I made that mistake. You want to lead me on. Just to make me wait. Nothing that I say to you seems as if it's getting through. What more can I do? Oh, why you treat me that way? You know it ain't right. Why you treat me that way? I don't want to fight. Why you treat me that way? Why you treat me that way? You know it ain't right. Why you treat me that way? Why you treat me that way? I don't want to fight.
What's my reason? Why do I stay? Why don't I leave you and go my way? You see that I am a fool for you. Why you treat me that way? You know it ain't right. Why you treat me that way? I don't want to fight. Why you treat me so bad? Why you treat me bad? You know you're wrong. Why you treat me so bad? Why you treat me bad? No. What more can I do? Oh, why you treat me that way? You know it ain't right. You know it ain't right to treat me. I don't want to fight. Said I don't want to fight with you. Why you treat me so bad? Why you treat me that way? Why you treat me so bad? Why? Why you treat me so bad? Why you treat me?
Recovering, there's a line deep in your mind. Ice and fire laying on your spine. If it's real, if it's love, maybe it will last forever. Who can say? Sometimes people change, there still remains the memory of your first love. Nothing comes close to this, the memory of your first kiss. Nothing comes close. The memory of your first love. Nothing comes close to this, the memory of your first kiss. Nothing comes close. Hour glass, there was nothing quite so tender. On and on, echoes love's surrender. Close your eyes and let passion breathe within you. Shadow fingers linger, dancing on your skin. Just remembering the memory of your first love. Nothing comes close to this, the memory of your first kiss. Nothing comes close. The memory of your first love. Nothing comes close to this, the memory of your first kiss.
Nothing comes close Nothing comes close. The memory of your touch, nothing comes close to this. The memory of your first kiss, nothing comes close. The memory of your touch, nothing comes close to this. The memory of your first kiss, nothing comes close. The memory of your touch, nothing comes close to this. The memory of your first kiss, nothing comes close. The memory of your touch, nothing comes close to this. The memory of your first kiss, nothing, nothing comes close to this. The memory of your touch.
Welcome back, ladies and gentlemen. We're going to be beginning this afternoon session in about two minutes. If you'd like to start to take your seats. Again, a reminder, please turn off your cell phones before we begin this afternoon session. Thank you.
Six or seven years ago, the international business was only a little over $1 billion, now it's three and a half billion dollars in total. International has become a really important part of V.F. When I look at our competitors, one of the things that I see that's different in our company versus other European or Asian competitors, is that we've established a platform in every major market that we want to be in.
What the great thing is about the V.F. model, the V.F. platform, is the distinction between front and back end. That means that the back end really kind of supports brand in the operational support. I'm talking about supply chain, the finance piece, the HR piece. While the front end, which is marketing, sales, product, stays completely independent for all the different brands.
What that has done is helped us to help all of our brands to build an efficient and effective presence throughout the region. They can think and focus on the front end, on building the brands, building the business in the market, and not have to worry about a lot of the operating infrastructure required to support that.
The benefit is to, of course, keep the uniqueness of each brand and the DNA of each brand, which is crucial to be successful with the end consumer in the long run.
Our integration of Timberland onto the Asia Pacific platform, I think, is great evidence of the power of VF, the power of our platform. We were able to quickly take a very large business and bring it into our systems environment, bring it into our office locations. If we hadn't had a well-established platform in Hong Kong and in China, that would have been very difficult to accomplish. So far, it has been very successful.
The Timberland acquisition was the biggest acquisition VF ever did. We have a big part of the portfolio in the EMEA region. One of the early wins VF could really apply and could implement best practice was on-time delivery. We could improve that within the first year from the 70s% up to high 90s on-time delivery into warehouse. At the same time, and that is really amazing, bring inventory down by almost 30%.
Just building on that, when you look at integrating brands, what we're able to do is take the skills that we have in one particular brand and cross-pollinate into the new brand so that you take that expertise and inject it so that you speed up the learning curve.
What really excites me about this international platform is that for Timberland in EMEA, we are only at the beginning. We just put this brand on the EMEA platform. We're just going after these synergies. We're just starting to get the benefit, it's going to be exciting to watch this brand grow into the future, into the coming years.
I'm very excited about having the opportunity to double the Asia business over the next five years or so. We've identified important categories where our brands are well-established and having success. Truthfully, our shares are relatively modest. The opportunity to grow those shares, to have the power of brands that are well-established already in those markets but are still relatively small, that really excites me going after that opportunity.
What excites me is the growth that they're talking about comes at high margin, very profitable, low taxes, and very accretive to V.F. profitability. It's a great story.
Good afternoon, everybody. Hope you had a good lunch. We're going to switch things up a little bit here, rather than have a couple hours with a PowerPoint on our international business, we're going to have a discussion about it. Joining me on stage right now are the leaders. At the end of the day, Bob Shearer's going to share a PowerPoint with you, rest assured. Our CFO comes PowerPoint in hand. We're going to talk about our international business a little bit. Let me introduce the people who are on the stage here with me. Seated to my right is Karl-Heinz Salzburger. Karl-Heinz is the President of our international business. To his right is Aidan. Aidan is responsible for our Asia Pacific business and all things Irish at V.F. To my left is Rick. Rick's been with V.F. for what?
17.
17. I was going to say 17 years because I thought we were the same year. Recently moved from Canada to Europe, where he's responsible for our Outdoor and Action Sports businesses. To his left is Martino, who's responsible for our Jeanswear, Sportswear, and Contemporary businesses. That's who we are, we have a pretty big scope over V.F. The video that we introduced this segment with, I think, makes a really important point about how we wrap our arms around acquisitions. That's important for you to appreciate because there's more of that most certainly to come in our future. When we acquired Timberland, our operating thesis was that we were going to try to take the best of V.F. to Timberland and bring the best of Timberland to V.F.
We had really open discussions with dozens and dozens and dozens of management in the room about where the best practices were and where they were shareable. Tom, in his presentation, talked about how we were able to add our substantial manufacturing expertise to their footwear facility in the Dominican Republic, they were able to help us sourcing the footwear that we sourced out of Asia because they had a bigger, better. They had best practice. That's how we approach all of our acquisitions. Certainly, as we look at our growth going forward, we're going to have acquisitions that impact our international business. Let me move to talk about our international growth. Over the last five years, we've been on a great run. We've doubled the size of the business from $2 billion to $4 billion.
We grew at a compound annual growth rate of 15%, and that now represents 37% of V.F. To put that in perspective for those of you who have followed us for a while, most of you remember not that long, a decade ago, when V.F. was a $4 billion or $5 billion company. We're now doing that much business outside of the U.S. Looking forward five years, it gets just as impressive. We almost double the size of the business again to $7.5 billion, growing at a compound rate of 13% and getting to 43% of our revenues. The question is, how are we going to do that? Where are we going to do that? With which brands and all? Start by asking Karl-Heinz a question.
He's been around as we build all these platforms, and the platforms are critical to our ability to acquire brands and enable their growth outside of the U.S. Would you talk about how those platforms have come together and also talk about Stabio, because we just opened a new headquarters for our international business a few weeks ago.
Sure, Rick. Let me start with the first question, platform. You have heard this word a lot today. For us, it's pretty simple. It's a vehicle for growth, as simple as that. It's a vehicle for growth because we combine global thinking with regional acting. Clearly, these platforms have been evolved over time. Starting with Europe, we started a few years ago, basically with a jeans organization. Now we have highly sophisticated organizations all over Europe, covering Central Europe, Eastern Europe, Western Europe, managing more than 10 brands. Asia is even more impressive. In Asia, we started with small operations in Hong Kong, where we had, again, managing jeans and some licensing business. Today, we have offices which span over all of Northern Asia from India, Korea, China, of course, Japan. I would say Southern Asia is still an opportunity where we can act.
We do business today there, but not with own organization. That's the first question. Second question about Stabio. First of all, Stabio is a place in Switzerland, where we just moved in. Our headquarter international is in Switzerland, on the border with Italy. We just moved in a month ago in this beautiful new building, which really.
That was very expensive, Karl-Heinz.
Which was.
We expect a return on that investment. You know how we are, right?
Well, you know Mr. Wiseman, right?
We all know that.
It's actually the single largest investment VF ever made outside North America. It's very important for us for many reasons. It's a green building, of course, and all that comes with that, sustainability and all that. There are two things which are very important. One for the employees and one for our customers. We are called the United Nations of VF because we have 600 employees with 35 nationalities there. For us, you have seen we have great brands. We have good processes and financial disciplines. The third leg to be successful is to have great talent. This building will help us to attract that. What we want from these talents also is to share the expertise they have. We have a lot of conventional meeting rooms, but also very unconventional. This is a gondola, from Switzerland, of course.
Where people meet inside. We have another one, which sits in the Vans area. It's an old Volkswagen, which we found in Thailand from the 1960s. Inside, it's designed with the checkerboards from Vans. Very desired meeting rooms. The second one I mentioned is for our customers. We have in the atrium, in addition to our showrooms for the brands, eight fully equipped stores. Because we want to use these stores. Partnership initiative in Europe is a big thing. We have a couple of 100 stores which are run by our partners. What we want to do, what we do, we invite them. We invite the Timberland folks who have Timberland stores, and we show them what we can offer in other brands. Ultimately, the goal is to get more stores and more business.
Great. Next question's going to be for you, Rick, because one of the successful brands that's been put on top of the V.F. platform and has grown dramatically, it's been the Vans story in Europe. Vans had a European platform when we acquired it, putting it on the V.F. platform changed that trajectory. Can you talk some about that and about how you think that's going to keep growing? Because it's been a fantastic success story the last few years.
Yeah, it sure has. You've heard a couple of times today actually about the strategy we employ in the U.K. to become as successful as we have in that marketplace. Really, there's four elements to that. The first one is a heavy up in regional marketing. We would distort our spends in those marketplaces. You can see here, this is actually the House of Vans in Berlin, which we did earlier this year. Really, we do those sorts of things to introduce more consumers to the brand in a market where not as many people know us. We move on from there, and we take a strong emphasis on protecting the core of our business, which is really that action sports and skate business. We know that's the foundation of who we are. We need to protect it at all costs.
It's a great way for us to tell our story. The third way we heavy up here is focusing our resources on our key accounts. We give them unique product marketing in-store strategies because we really know we need to win with those accounts. That's where we get scale out of those businesses. The fourth aspect of the strategy, we cluster our stores into these marketplaces because we know this is the ultimate way we can bring a brand experience to our consumers. That's worked really well for us in the U.K. We're executing it now in Germany, France, and Italy, so far, the results are absolutely fantastic. Once we win in those markets, there are more than 30 more in Europe where we've got a platform where we will be able to leverage this.
Thanks, Rick. Martino, I'll go to you. Martino's had responsibility for our contemporary and sportswear businesses for years. Earlier this year, we asked him to take on the responsibility for our Jeanswear business. That business had struggled some lately, but it appears to be turning a corner. Martino, can you talk some about that?
Of course, Eric. Ladies and gentlemen, good afternoon. The Lee/Wrangler business trend in Europe is now stabilizing, and actually, the profitability continues to improve. We do see growth opportunities for the next 5 years, and even shorter than that. What we're going to focus on to deliver the opportunity, we're going to focus on our core business, which is denim bottoms. Our consumer segment, to Stephen's presentation, we really completed the global consumer segmentation, and we chose specific segment that we're going to address and try to build lifestyle around that. Also, we're going to try to really focus on product. Product is a key, and product is based on innovation. I think Scott spoke about innovation platforms, and this is another good thing about V.F. This innovation platform is global, so everybody contributes and participates.
Some of those innovations are actually now coming to market. They're newly introduced, and I would like to mention a couple of those. Lee is developing what we call Stretch Deluxe. Stretch Deluxe is women product with made in Italy fabrics, fantastic stretch fabrics, and on-trend fit and finishing at very affordable price point. It's premium product, innovative product, affordable price point. It's already getting traction and strong response for Lee brand in Europe. On the other side, we call Wrangler Denim Performance. It's another way to translate the same consumer segmentation into local execution. It's about really designed to function and provide what we call active comfort every day. Again, all those researches and developments that could be about water resistance or stain repellent or cooling, they're going to be applied and sometimes actually locally executed. We have bright spots as well.
We're going to focus on those. We're going to focus on markets where the two brands have leading positions, like Scandinavia, Sweden for Lee or Germany for Wrangler, and we're going to try to invest behind our key partners. You see some images. We're quite strong in department stores in Europe. We'll try to invest behind those presences and take shares and develop more and more doors and increase our space and footprint in those key accounts. In Poland and Russia as well, very important markets. We have a dual brand store concept. Today, significant footprint because we have 250 doors in Poland and 25 by the year-end in Russia. That's another way to really keep increasing our brand visibility and making the brands accessible and successful in Europe.
Thanks, Martino. Aidan, over to you. In September, we had an Investor Day in Shanghai. Obviously, this whole crew was not there, but many were present at that meeting. You laid out your thoughts about how we could grow our business in total, 17% in the region and 21% in China. Thought it'd be helpful if you'd share with this group how exactly you expect to get that done.
Okay. Well, clearly, China is the key to driving growth in Asia Pacific. We think that that will continue to be the case in the coming years. We've had huge growth there over the last five years or so. The truth is that in all the categories that are important to us, while our brands are well-established, our market shares today are low. They're typically in the single-digit range.
We see a great opportunity to grow our shares. Our China revenues this year will be in excess of half a billion dollars, and we expect to more than double that by 2017. Beyond China, as we look across North Asia, we have subsidiaries established in all of those markets. Most recently, we opened Korea in January of this year. While we don't have all of our brands on those platforms today, there are opportunities to extend our brands' penetration of those platforms. They're all successful, they're up and running, and we have the expertise necessary to do that. If I think even longer term and look at Southeast Asia, it continues to be an area where there's a lot of growth. We don't think the timing is quite right for us to be there directly today, we will be there in the future.
Today, we work with distributors and licensees, our brands are well-established, well-positioned. We're investing in consumer learning, consumer understanding, that we'll be ready for the right time to maybe selectively look at opportunities to expand into markets like Indonesia and Philippines, which have tremendous long-term potential for VF.
Thanks, Aidan. Karl-Heinz, let's talk a little about how our platforms internationally help launch new brands. Karl-Heinz is a subject matter expert on this. For those of you who don't know, he was the President of The North Face globally when we acquired it in 2000. He's been a part of all the big acquisitions we've done, and particularly those off the international platforms. Napapijri and Kipling were two European businesses we acquired in 2004. We've also bought Vans, which had a big presence that came onto our platform. Timberland, of course, is the mother of all international integrations for us. You've had lots of experience at how the platforms help enable the growth of those brands. Can you talk some about that?
Sure. Actually, it helps a lot. That helps a lot in three ways. The first one is entering new markets, the second one is share leverage cost, the third one is share best practices. Let me give you an example. Entering new markets. Eric mentioned Napapijri, a company we bought in 2004, was predominantly large in Italy, more than 70%. A few years later, we basically utilized, literally, the subsidiaries we had outside Italy, in Germany, in Benelux, in France, put in some people. In an actual house, we already put in people who had only marginal cost increases. Today, four or five years later, Italy is 30%. Has not declined, but the company grew in many other countries. Another example is Timberland. It's a big company, pretty sophisticated in the organization, has a great network in Asia, where actually we have reverse integration.
They have subsidiaries in Malaysia, in Hong Kong, in Singapore, not so much in China. We have a lot of experience in China, we added them on our machine in China. The second one is leverage cost. We heard e-com is a big deal now in Europe as well. Every brand has its own website and its own merchandising skills. The engine, the systems to run it are the same. They're shared. That's another great example. The third one is opening stores. We are catching up compared to North America. We're opening more stores than we have done in the last five years. Every brand has to find their worth. We have a group of people, experts in real estate locations, which help finding the right locations in Europe. The third one is sharing best practices.
Sure. Great. Thanks, Karl-Heinz. Martino, we just touched on two brands that were the two European acquisitions we made, both of which you've been responsible for quite a while. Napapijri and Kipling, they've had terrific success. Can you talk some about what's behind the performance of those two brands?
Yes, sure. First of all, I joined V.F. actually in 2006, so shortly after the acquisition of those two brands, and I've been in charge of those two brands since then. I really saw the growth and then how they changed and how, I think, very importantly, leveraged the V.F. platform. Those two, in similar ways and maybe with different outcomes, are very good examples. Let's start with Kipling. Kipling was one brand out of one country. It was one brand making bags out of Belgium. Step by step, we were leveraging the iconic identity of the brand, which is this fabric, the crinkle nylon, but also developing markets, not only in Europe, but then also developing distributors' platform around the globe. This is really important because it allowed Kipling to get a different traction and really now be one of the fastest-growing brands.
Kipling has grown since the acquisition at a CAGR of 14% in sales. It exceeded both sales and profits acquisition targets. Last year, Kipling was a brand globally of approximately $250 million. As a curiosity, Kipling sold last year eight million units, which means 30 bags every minute. This is interesting now. Kipling is a brand in 60, and actually more than 60 countries globally, selling at a pretty intense pace their product across consumers and continents. Napapijri, on the other side, another good story with double-digit growth, 11% CAGR since acquisition. To Karl-Heinz's point, it came out of Italy in a very special, unique way. This brand with the Norwegian flag, some patches, a lot of details, and it was very unique. We were trying to start leveraging this uniqueness, but into a more pan-European presence. That's the way it happened, actually.
It happened through the key department stores, where it sits next to the big premium casual wear brands. It happened through a model of partnership stores that we developed quite quickly in the last three, four years, and accounts today, 150 doors across Europe. It's again, how we were able to leverage a special identity into a much bigger business. I think two successful stories with strong performance behind, and above all, I think now ready to really go bigger and global.
Thanks, Martino. Karl-Heinz, let's touch again on Timberland in Europe, our biggest acquisition in the history of the company, a big platform in Europe, huge integration process, and a lot of potential for us to grow that business. Can you comment on all that?
Sure. The first part, how is it progressing, the operational side? I would say we're completely on track. We did a lot of work both in Europe and Asia. Timberland had a headquarters in London. We moved that into Stabio, in our headquarters in Switzerland. Actually, those folks were the first-
Last month.
Last month, they were the first moved in the new building. We are fully integrated. Same systems, same financial discipline. That's great news. Same in Asia. Asia, we moved the company from Singapore to Hong Kong. We rebuilt the team. It's now fully under the leadership and platform of Aidan. That's good news. We are there. On the growth side, starting with Asia, we have been and are, and plan to grow double-digit with Timberland in Asia. It's a good market. Very balanced. 50% apparel, 50% footwear. That's a great story. Europe is a little bit more complicated and needs some explanation. The largest market in Europe is actually the southern hemisphere for Timberland. We all know, at this moment, it's probably the most difficult one in terms of economies. Italy, Spain, France, those countries. It's hard to sell anything in these countries at the moment.
What gives us confidence is that Central Europe, which is big, Germany, Austria, Switzerland, and Scandinavia and Eastern Europe, the brand does well. It has been growing since we acquired it. It gives us confidence that over the next year, we will deliver. The next 5 years, we'll deliver the 6% growth rate which we have planned. How we do it. Timberland has a pretty sophisticated network of stores. We have about 50 owned stores and 250 partnership stores. Now, 250 partnership stores is a meaningful presence, and half of them are in Italy. It's a big number. What we are doing now, we have the organization, we have the talents, we have the best practices. We are intensifying that launch in markets which are a little bit healthier. Germany, Austria, Switzerland, Scandinavia, and Eastern Europe.
On the Asian side, the big opportunity is we have also about 50 stores between Japan, Malaysia, Hong Kong, and Singapore. The big opportunity lies with China. We just started in China with Timberland, have a relatively small number of stores compared to the other brands. It's a long way to go there.
Thanks, Karl-Heinz. Aidan, while we're on the topic of China, you had talked about The North Face and really establishing size in China. To do that, the outdoor industry is actually very small in China. For The North Face to get big in China, not only to have to succeed versus competitors, but has to help shape the industry. Can you talk about that some?
Just by way of background, we've had tremendous growth since the launch of the business in 2007 in China. This year, in fact, it'll be V.F.'s biggest brand in that market. China will be the second-biggest market in the world globally for The North Face. Tremendous progress. Again, a bit like my earlier comments around market share. The truth is that our market share today is still less than 10% in a category that's very fast-growing. Outdoor is one of the most attractive categories for growth. Way outperforming, for example, the sports sector. Also, the truth is that our brand awareness is low. Our brand awareness is lower than a couple of our major competitors. We see a tremendous opportunity to build that awareness and to become the indisputable market leader. That's our goal.
We're very focused on being the market leader in that market. That, I think, revolves around two key points. One is communicating the unrivaled performance attributes of The North Face brand to Chinese consumers in a way that they understand. We've done a lot of homework about making sure we understand how to message that. The other is growing the size of the pie and encouraging participation in outdoor activities. Again, with all the work that we've done around insights, we're very clear about how that can best be done. That manifests itself in a very tangible way with our digital ecosystem that we put together, because it brings together all of their information needs. There's a huge thirst for information about how to engage in outdoor activities, how to join clubs, what equipment I need.
Of course, we're turning that ecosystem into an e-commerce opportunity. We've had e-commerce up and running in China since September of last year. We're linking the whole cycle together, which I think is very, very important in such a competitive and fragmented world of digital as we see in that market. The final point, and I think this is another big development for us, we're launching our first TV campaign in China in fall of this year. Again, we see that as a critical medium to drive brand awareness and to get people to engage in this digital ecosystem, which we've spent the last couple of years building. We think the best is definitely ahead in terms of The North Face, and that the goal of undisputed market leadership is a very tangible, real goal for the brand to go after and achieve.
Thank you. Martino, over to you. Mike talked earlier about our global direct-to-consumer strategies and how important they are for the brand. Scott actually showed a picture of one of your stores in Germany. Can you talk some about how our Sportswear and Jeanswear businesses are getting after the direct-to-consumer opportunities in Europe?
Yes. I would like to share actually a couple of stories, successful stories for Kipling and Napapijri that are also going to be important and relevant for the future growth of the brand. Let's start with Kipling. I think you've seen how Kipling went through this very well-integrated strategic work and tried to really become a consumer-centric brand. The completion of that in the second half of last year was to redesign the Kipling store concept, and we called it the House of Kipling now. Kipling today has 240 stores globally, which is a big number. We own 55 of those. 185 are operated by partners or distributors. If you look at this portfolio, it's very important that store productivity is strong. The best way is to make sure consumers connect.
I think it was an interesting way and very innovative to redesign the store concept. You see some images here.
In a constant prototyping with open doors and constant consultations with stakeholders and consumers. We did this in London, and we did it in two stores in London, on Brompton Road and Westfield Mall. London is also a good place to get global consumers because of tourist traffic. We were really able to get fantastic feedback live and define by the end of the year what that concept looks like. This year to date, huge acceleration in those two stores and putting us in a very good position now to roll new stores ready to go in Hawaii, Mexico, Turkey, and London as well, and refit other stores across Europe. Very important success story on how to connect consumers and actually delight and serve consumers directly. Napapijri, quickly, a different story. Napapijri was able to build a very strong presence in Europe through partnership stores.
The partnership store model is a kind of smart, low CapEx investment model where the brand position gets, I think, showcased at best, leveraging local partners' know-how in the best possible location. This way, Napapijri started this a little bit opportunistically in the early 2000s, but in the last three years, we were able to open 100 doors across Germany and France mainly. To Karl-Heinz's point, that's one of the ways that we got out of a strong dependence on Italy. Today, Germany and France are the biggest market for Napapijri in Europe. As of now, 150 doors for Napapijri here in Europe with this format, with an ambitious plan to double this number by 2017.
Thanks, Martino. Rick, same question for you for Outdoor & Action Sports Brands.
Sure. Outdoor & Action in Europe has a really robust portfolio of both owned and partnership stores for The North Face and Vans. In the last couple of years, the real bright spot has been e-commerce for those two brands. The North Face started off a couple of years ago with three country markets where we were live with e-commerce, last year we added six additional markets, which really filled out our portfolio there. I'm happy to say today, that's the fastest-growing channel for The North Face in EMEA. It's proven to be a real great way for us to connect with our consumers. When we met in June last year, some of you may have been in New York for the Vans analyst meeting, we were weeks away from going live with Vans e-commerce in Europe.
I'm happy to say over the 120 days that preceded that meeting, we added six Vans markets to e-commerce in Europe, we're about to add a seventh actually in about two weeks from now. That business has exceeded our wildest expectations. We see some real upside there, it's just been a fantastic experience.
Good. Final slide for all of you then. As you think about 2017, can you just share your thoughts with the audience about what excites you most about each of your businesses? Rick, I'll come back to you to start.
Sure. I don't know what number speaker we are today, whatever number we are up here, every single one before us has mentioned consumer insights. I have to say that with Vans and The North Face, in particular The North Face, we were really pioneers for V.F. in consumer insights, that has given us such insights into what our consumers are looking for from our brands and how we can deliver against their expectations. Everything from how we create product, how we message our marketing efforts, even how we set our floor spaces in our retail stores. All of those things combined, the consumer's responding to them so positively, I just see so much more opportunity for that in the future, I'm really excited to see how that pushes our brands to innovate even more.
Good. Martino?
Well, excited in many ways. First of all, for the financial target that we have. Which is very interesting. I have to say, we really see a clear and robust strategy for Kipling, as we discussed, to really become much bigger brand globally. Also a great expansion story out of a European anchor brand. Napapijri is consolidating this premium casual market in Europe, and it's getting ready to really go global, starting with Asia actually right now. Last but not least, our Jeanswear iconic brands in Europe. We see that they're getting traction again. They have compelling stories and products and in-store propositions. I think we can drive consumer loyalty and gain market share again in those two brands.
All right. Aidan?
Difficult question to answer for Asia because there's so much going on there and so much opportunity. If I had to pick one, it would be scaling up our investments in brand building. We've grown very fast. Since 2007, we were about $150 million. This year, we'll be about $1 billion in Asia. We've spent a lot of time and energy building up the organization, the infrastructure, opening doors. Most importantly, I think, touching on the insights again that Rick referred to, we've spent a lot of time and a lot of resource understanding our consumer. Now it's all about execution and activation. I believe we have the knowledge and the capabilities that are necessary to really execute very well, make every dollar count in a way that our competition will not be able to match.
With the consolidation that I expect will happen in Asia over the coming years, I think we're uniquely positioned to take full advantage of that. I expect that to translate into faster share and faster revenue growth.
You get the last word.
Thank you. Well, this is the senior leadership for international. Then for Europe and Asia, the fact that they are so confident, that makes me confident.
It's funny you should say that because when I think about the task at hand, getting this business to $7.5 billion, I remember really clearly when it was a $1.5 billion business. Five years ago in 2008, we were coming out. I was brand new as a CEO. We were talking about what we thought the future of the company might be. Our biggest single growth platform had to be our international business. For lots of reasons. It has higher operating margins, higher after-tax income rates. There are a lot of opportunities for us to take our brands on the road outside of the U.S. When we were laying down really bold plans five years ago, Aidan, what were you doing? You, in 2008, you were in Asia doing what you're doing.
Yeah.
Karl-Heinz, you were doing what you're doing. Martino, you were doing Rick doing what he's doing, but he's doing it in Canada. For the same reason that Karl-Heinz is confident, these guys have delivered year after year. The teams that support them have delivered extraordinary results for our organization. When I look at what's going to happen over the next five years, I'm just completely confident that the $7.5 billion number is real, because these guys do what they say they're going to do. They're surrounded by great people, and there'll be more brands to be a part of that. Hope that helps you understand that piece of the story. We're going to have about a 60-second disruption here right now while we exit the stage. The podium comes back, then Bob Shearer will be joining us.
Thank you very much for your attention.
Thanks.
The best part of the day. Say, that was pretty slick. Well done. Well done, guys. Almost feel like I'm at a NASCAR event or something, the way you did that. Yeah, I just wanted to, first of all, to start with just to say really, really nice to see you all today, and really, really appreciate all of you joining us today. This is, we're nearing the end. We're getting pretty close to the end here. My job is to pull all of this together, our strategies, our pathway to the future, reasons to believe. Eric said that I have a PowerPoint. Yes, I do have a PowerPoint for sure, but I don't have a finance video. Unfortunately, no video for finance today. Just numbers. Pretty good numbers, though. Okay, by now you know the theme for today.
It's to showcase our powerful brands and also our powerful platforms that you've heard so much about today, there was something else that we wanted to do. We wanted to bring some context to all of you today in terms of how we run our business, how we think about our business. I think we've done a pretty good job of that. I hope that you agree with us. We've talked a lot about how we've grown over the past and how we're going to continue to grow over the next five years. In fact, five-year plans have been a really important measuring stick for V.F. for a number of years.
You heard Eric talk earlier about the fact that the last five-year plan we put out to all of you was in March of 2011, because we've had such strong success against that plan, it kind of necessitated this meeting. I'm going to go back just a little bit further than that. It was in the early part of 2008 when we talked about our plans for the period 2007 to 2012. I'm going to show you a little recap here of how we've done. This is a snapshot of that period, it's kind of interesting. I know that some of you, and I know who you are, some of you said that, "You know, that plan is pretty bold." Some of you may characterize the plan that you're seeing today as bold as well.
Let's take a look at how we did versus hitting our marks. Revenues, we established an $11 billion plan at that point in time. This is for 2012. We hit $10.9 billion. Pretty close. A miss. It was Martino, right? He said, "They're interesting." Now you know how we operate around V.F. Corporation. International. We said that international would be 33% of total V.F. We really overachieved that at 37%. Great result. Direct-to-consumer, we said would be 22%. 21%, a miss, right? Pretty darn close. Operating margin. Okay, did fall a little bit short on operating margin. Now, I could make the excuse of taking on the biggest acquisition in all of V.F. Corporation's history, which brought our average down, would've been 14.5%, much closer to the 15%, but I won't use that because actually, hopefully, you'll forgive us for that.
In earnings per share, really overachieved that as well. We said we'd grow by-
Hit.
A big hit. Home run, 10%-11%, and we achieved 13%. What's the takeaway here? The takeaway is that V.F. is a company that delivers on its promises. We intend to do exactly the same with this latest five-year version. All right, here's what I'm going to do. What I'd like to do now is take a little bit closer look at our financial commitments. You heard a number of them from Eric. I'm going to give you a few more in terms of the details behind this plan. I'm going to start with revenues, and as we look at the last five years, it's really important to keep in mind that most of our businesses, as you know, took a couple years off in that 2008 and 2009 period.
Obviously, that has a pretty big impact on the overall results and especially in revenues, the comparisons, and the growth rates. I'd like to tell you, over the last three years, now this is 2010, 2011, and 2012, over those last three years of this period, our organic growth rate, our organic growth rate alone was 10%. Our CAGR from 2007 to 2012 was 9%, as you can see from the chart. That landed us at that $10.9 billion. It was fueled by both organic growth and also smart acquisitions. The question is, what's next for the next five years? At $17.3 billion, we'll grow by 10% per year. Now note the breakout of growth. Eric mentioned this earlier. Our expectation is to grow 8% organically and 2% coming from acquisitions.
The point here is that we are really confident that we have the right strategies, the right brands, the ability to execute, to deliver on this target. It is all about our brands and platforms, and it's built on those strong connections with consumers that you've been hearing so much about today. Our international platform, direct-to-consumer. There's not necessarily a lot new in terms of our model. That's the good news. To me, that's exactly the good news. The same things that have been working so well for us are going to work for us going forward. If you were at our 2011 investor meeting, I think this slide is going to look pretty familiar to you. These are the platforms that will drive a substantial part of our growth.
By the way, there's another common theme here, right, in these platforms, I know many of you know this, it is that they are also our most profitable businesses. That works, right? Having our fastest growth businesses also providing us with the highest returns. By the way, it's not meant to diminish by any stretch the other businesses you've heard about today. All of our businesses play a very important role in this plan. Let's take a look at brands. These are our top five brands. They're all above the billion-dollar mark today, most well above. We've seen and expect the greatest growth from the top three. Don't forget Jeanswear. You heard it from Scott. This is really a new era for Jeanswear.
With a mid-single-digit range of growth, our jeans business, with their strong profitability, also really strong cash generation, will be a significant contributor to this plan. We see these five brands, plus you also heard about Nautica and 7 For All Mankind today, and our 25 other brands that we have in the VF portfolio. We believe that they represent the industry's most diverse portfolio and is capable of the broadest reach to consumers today. That's really a big part of our story, I think Eric mentioned this earlier. Our diversity, it's really helped us. It helps us counterbalance the challenges in any one consumer group, geography, distribution channel. It gives us a lot of confidence that we're going to be able to consistently produce those strong returns for our shareholders, and just more on that a little later.
Most of you know that we run our businesses under a coalition structure, just quickly, a coalition is a grouping of generally like businesses sharing some common characteristics, and that includes management. The idea is to get at the economies of scale, but maintain very distinct brand personalities. All of our coalitions today earn very respectable operating margins. All are contributors in different ways, as I said, to the overall revenue and earnings projections. The biggest contributor to our growth, clearly, will continue to be Outdoor & Action Sports. It's where we've invested most heavily, and for good reason. Of all of our coalitions, it's had and will continue to have the fastest growth rates, combined with the highest gross and operating margins. It also includes our three largest and fastest-growing brands. Take a look at the breakout there.
11% organic growth is the expectation, 14% with acquisitions. The organic growth rate, yeah, it's a little slower than where it's been. These are also much, much larger businesses than they were five years ago. Of course, they'll continue to grow as a percent of total VF. In fact, a couple of years ago, we told you that we were expecting Outdoor and Action Sports to represent half of all VF, and we said by 2015. At the end of 2012, the coalition was 54% of total VF. By 2017, we expect that percentage to be 64%, so nearly two-thirds. Clearly, it really is clear that VF is a company that's anchored by our Outdoor and Action Sports businesses. The great thing about this chart is that all of our businesses are growing. It's just that Outdoor and Action Sports outpaces all the others.
Once again, with their higher gross and operating margins, that's really how you'd want it. Regarding the acquisition component of our plans, I guess it's no surprise that we expect revenues coming from M&A to fall into the Outdoor and Action Sports area. We've been pretty consistent with that. It's where we've been hunting. It's also where we've had great success. Let's shift gears a little bit. Let's talk about growth within the international side of our business. Over the last five years, our growth outside of the U.S. has averaged 15% per year, and that includes absorbing the impact of that recessionary period as well. As we look forward, we're expecting those businesses to contribute 13% per year on the roughly $4 billion of business in 2012. That includes a couple of points from acquisitions as well.
You know by now that there are several very, very distinct platforms for growth on the international side. First and foremost is geographic expansion, expected in Europe, in Asia, and also in the Americas. Direct-to-consumer will also play a very significant role, both by adding new stores and expanding e-com, which outside of the U.S., you heard about it earlier, is in its very, very early stages. 2012 international was responsible for 37% of total revenues. In 2017, expected to move to 43%. Once again, growing highly profitable businesses attached to a significantly lower tax rate. Really, really important. It yields high shareholder returns. It's a very powerful combination. Just a couple charts to summarize where that growth is going to come from. Starting with the 2007 to 2012 period, VF's international growth was influenced by Asia, and maybe more specifically China, but certainly not limited to it.
Pretty strong growth in both the Americas, and that's non-U.S., of course, and Europe as well. As we look forward, pretty consistent pattern with the last five years. In fact, the Americas and Europe's growth is expected to be really similar. A little slower in Asia, once again, on a much larger base. There are some newer platforms as well that we didn't talk a lot about today that support this growth, like Korea and Mexico. Double-digit rates of growth expected in every region on the international front. Let's look at another really, really important growth driver for us, and that's direct-to-consumer. Serving consumers directly through stores, through e-com. From 2007 to 2012, our five-year CAGR was 17%. We more than doubled our revenues during that period. We expect similar growth looking forward, 14%.
14% over the next five years, direct-to-consumer should move from being 21% of our total revenues today to 25%. As Mike Gannaway said, it assumes adding over 600 new stores. Those are net numbers of stores. As we all know now, a lot of growth in e-com as well. We're really confident in that because we're seeing it happen today. Year in and year out, we've demonstrated we can earn really, really strong returns on the investments that we make in direct-to-consumer. Especially outside of the U.S., our margins are expanding, which gives us a lot more confidence there. Really an important growth driver for V.F. with great returns. Very, very confident that we're going to get this done. My favorite topic, as I know some over here would agree to. Gross margins. This is a story of strength and consistency.
We've added 300 basis points to our gross margin over the last five years. The bottom line is, we expect the same going forward. Keep in mind that we've guided to a 100-basis-point improvement for 2013. Right, for 2013. We'll do a little math here. That means another 200 basis points of improvement over the next four years. Right? That's 50 basis points per year. That's why I'm CFO, right? 50 basis points per year. We've been really, really consistent, as you know, about earning 60 to 70 basis points of gross margin expansion from mix alone. From mix alone over the last five years. That's as a result of our fastest-growing businesses and platforms, Outdoor & Action Sports, International, Direct-to-Consumer, earning our highest gross margins.
Our confidence is really high, and you heard some great opportunities coming out of our supply chain in Tom's presentation to expand gross margins as well. Those are opportunities that no one else in the industry has. They can't match it. What it does is it keeps us ahead of the competition and also ahead in the race for consumers' dollars. Our gross margins are strong, especially considering the relatively low percent of direct-to-consumer for V.F. Gross margins equate to brand equity. Our brands are strong. As we all know, we get the gross margin right, the rest is going to fall in place. Just to further that point on the mix impact, just a quick look here at how mix impacts our business. Gross margins within our Outdoor & Action Sports businesses are about four percentage points higher than V.F. averages.
This has been a really consistent story for some time for us. You heard from Steve and others talk about the strong connections with consumers in these brands. That translates into stronger margins. You also heard the details by leading with innovation, and that's innovation that we get paid for and our ability to connect with consumers. We're really confident in our ability to keep gross margin rates in Outdoor & Action Sports well above the V.F. average. International also delivers above-average gross margins fueled by, this is pretty straightforward, by higher price points. Our Direct-to-Consumer business, also a big part of the gross margin story. Our full-price stores, which are an expanding portion of our total Direct-to-Consumer business, provide us gross margins that are, on average, 20 percentage points higher above the V.F. average.
Once again, our fastest-growing businesses with our highest gross margins, that's been working for us, and it's going to continue to work for us. All in all, hope we've given you a lot of reasons why we're really confident in our ability to hit that 49.5% gross margin target. All right, let's move to operating margin. Well, now, that's not exactly the picture that your CFO likes to see. It does require a couple things to keep in mind. First is that the global recession didn't help us a lot over this period of time. Maybe most importantly, the 2012 margin includes the impact of the Timberland acquisition, as you know by now. Without Timberland, our operating margin in 2012 was in the mid-14s. I think that puts a little different perspective as we look forward.
I think it also speaks to the opportunity as we look ahead. As we look forward, keep in mind that we're guiding to nearly, once again, about 100-basis-point improvement in our operating margin for 2013. Once again, here comes a little bit of math. That means another 150 basis points of improvement over the next four years. Given the gross margin improvement expected and the Timberland improvement anticipated, we're really confident in our ability to hit the 16% mark. Even with, I might add, even with some expansion in the investments behind our brands. For example, our marketing spend in this plan, it will increase from about 5.5% of revenues today, that's where we are today, to about 7%. 7% by 2017. Yep, it's driven by investments in our biggest brands.
It's largely offset, but not fully, largely offset by leverage elsewhere in the expense ratios. Once again, 300 basis points improvement in gross margins, 250 anticipated on the operating margin side. That brings us to earnings per share. A five-year CAGR of 13% in EPS over the 2007 to 2012 period. It's not bad, let's just do that again. At that rate, for the next five years, our 2017 EPS will be $18, nearly double what it is today. Eric mentioned this earlier. We talked a lot about 18 by 2017. Just didn't quite have the same ring to it in terms of the messaging today. You should be assured that we are absolutely committed to the $18 a share by 2017. It's a great number any way you look at it. Return on invested capital.
We know that ROIC is really important to you should know that it's equally important to us. We raised our returns by 160 basis points over the last five years, that's even despite the largest acquisition that was near the end of the 2012 period. We expect the ROIC to raise to about 20% by 2017. Reasons to believe here. One is the anticipated improvement in the Timberland business. Our expected improvement in the returns on the Timberland acquisition will obviously have a significant impact on our returns. The stronger margins as well that we just talked about. We're proud. Frankly, we're very proud of how we manage our businesses and the capital allocation to earn these kinds of levels of returns, and they are some of the highest in the industry. All right, another key metric, that's cash flow from operations.
It's what funds our growth. We've always been a strong cash generator at V.F., growing our cash generation to the $1.3 billion mark in 2012. That's been driven by strong earnings growth in our expanding direct-to-consumer business. The reason for that, cash is immediately collected. There is more to come. We expect our cash generation to near the $2.5 billion mark five years out. Our projection is a cumulative total of $9.5 billion of cash generated over the five-year period. I guess your question is, what do we do with that cash? Actually, we've been pretty consistent relative to our priorities for cash. Really no big change here. Acquisitions clearly remain our number one priority. They've provided incredible shareholder return over the years. They've transformed the company, quite frankly. As I said earlier, the likely area that we'd add brands, Outdoor and Action Sports.
For our dividend, a 40% payout ratio remains our goal. For share repurchases, our approach remains the same. We view our buyback program more as a maintenance level type of spend, meaning to offset the dilutive impact of stock option exercises. I want to make one thing clear here. Our intent is not to stockpile cash. Hopefully, over the years, we've demonstrated that we're fairly prudent when it comes to how we invest. We'll make good investments for our shareholders going forward. Related, just a few more points related to our acquisition strategy. The formula that we've used for success continues. We're looking to leverage our capabilities, existing platforms, our global infrastructure, and of course, we're looking for new platforms that allow us to leverage our strengths that we've outlined today, including building those strong consumer connections and innovation.
You should know that we evaluate every single acquisition opportunity through the lens of total shareholder return or TSR. The bottom line here is that, once again, our acquisitions have been a really important part of our V.F. story for some time, and we expect that they will be going forward as well. Move on to our dividend policy. Back in 2006, we nearly doubled our dividend in an effort to return more value to shareholders. We did it knowing that we could fulfill our acquisition strategy, given our strong cash generation, and at that time, we committed to, over time, a 40% payout. 2012, having just brought Timberland and its earnings into the V.F. fold, our payout rate declined to 31%. Once again, I want to make this really clear. We remain committed to the 40% payout.
We're not going to get there all the way back in one year. We did take a big step in 2012 with a 21% increase, but once again, not enough to get us back on track. Yep, we are absolutely committed to the 40% over time. Our five-year goal is to work our way back towards that 40%, and we are absolutely committed to that. I'm pretty impressed that with this goal is that our strong cash flow generation, with our strong cash flow, we can make acquisitions and still get the dividend to the 40% level. Finally, we kind of refer to this as our guiding light around V.F., and that's total shareholder return. I mentioned it earlier probably a couple times. I call it our true bottom line. Like the chart says, if it's important to our shareholders, it's important to us.
Our brands understand, our people are trained in TSR. We use TSR metrics to evaluate every single business' plan, each acquisition, each potential divestiture. With a five-year track record in TSR of a 20% growth rate, clearly, the focus has worked pretty well for us. You know, we're not done yet. Looking forward, our confidence is really high that we'll continue to provide our shareholders with those superior returns that they've become accustomed to with VF Corporation. These are the components. This is how we lay out our TSR model. I think we've covered pretty much every piece of this in today's presentation. Maybe with one exception, that's in terms of the PE change. Actually, maybe that's where you should fill in. Maybe you should fill that gap in. Here's a couple things that I remind you of as you do that.
Two-thirds of total V.F. will be in our fastest-growing, high-margin Outdoor & Action Sports businesses. As I said earlier, we are a company that continues to take the shape of an Outdoor & Action Sports business. That coalition includes our three largest and fastest-growing brands: The North Face, Vans, and Timberland. Growth in these brands and across V.F. will be supported by geographic expansion, a growing direct-to-consumer business, including highly profitable e-com initiatives. V.F. will continue to take on a different look over this period. In summary, in many ways, the story that we've presented to you should be pretty familiar. We keep doing what we told you we would do. We've been growing internationally, we've been growing direct-to-consumer, growing our brands. V.F. is a growth company with a growth culture. I hope that's becoming very clear and is very clear to you.
We'll hit $17 billion by 2017, then we'll keep moving ahead, continuing that really strong trajectory of growth. Thank you very much for spending the day with us. What we're going to do now is just take a brief moment to set up for the Q&A, just bear with us for a minute or two, if you would. Thank you very much. You see this cage? In my head.
The cage, right?
Keep standing or are you talking?
You're not coming? Oh.
We're happy to open the floor to your questions. Could we get the house lights up a little bit so we could There we go. Sorry. Hard for us to see you. If you have any questions, please raise your hand and we'll get a microphone to you and do our very best to answer your questions. Right down here. No. In the back, and then there's one in the front row after that. Mr. Durble.
Thanks, Eric. Mr. Shearer, this part with you, if I could. When you laid out the gross margins on the three different businesses, Outdoor, International, and direct-to-consumer, can you talk a little bit about the operating margin levels of those businesses and does it carry through, and especially the Outdoor & Action Sports area?
Does it carry through, meaning what, Bob?
Is there operating margin expansion in those segments, mix shift versus can The North Face and Vans, Timberland continue to grow their operating margins?
Yeah. It might be easier to talk about that. I want to answer your question from more of a coalition standpoint. A couple things to keep in mind from the operating margin side of things. Once again, as I said in the commentary, we're looking for 100 basis points of improvement this year. That really begins to narrow the gap. In addition to that, as we look at our projections on a coalition-by-coalition basis, we do see the opportunity clearly to expand our Outdoor & Action Sports operating margins, and it'll expand in a couple of ways. Number one is Timberland. Timberland will clearly improve a lot during this period of time. Its operating margin will expand. That'll expand Outdoor & Action Sports.
In addition to that, this is something that we haven't talked a lot about, but our fastest-growing brand right now, which all of you know is Vans, also has the highest gross and operating margins across V.F. What happens is, as Vans continues to grow at that high pace that we talked about, there's a little bit of a mix shift going on within Outdoor & Action Sports, so it also helps elevate the overall Outdoor & Action Sports operating margin. The bottom line on those businesses is we expect them to return to that 20% mark in our five-year plan. In the other businesses, a couple of things. Jeanswear. Jeanswear is looking toward a really strong improvement in their operating margin this year in 2013. They're back to those historically higher levels, and we expect that to be maintained over this period of time.
Beyond that, we do see some improvement in our Imagewear business, in our Sportswear business, and also in contemporary. Bob, I hope that answers your question. That's the way we think about it. We had a question in the front row. Evren? Evren?
Thanks. It's Evren Kopelman, Wells Fargo. I had a question on the capital allocation, thinking about acquisitions versus more aggressive share buybacks. I ask because when I look at your targets, the 10% top line, the 13% EPS growth, and compare that to some of your peers that are delivering more EPS growth from even less top-line growth, how do you compare spending the capital on a maybe more aggressive buyback that some of those peers are doing versus acquisitions in your case?
Want to start on that, Scott?
Sure.
One thing I think that's important to know is in this five-year plan, the acquisition component contributes about the same amount that if we use the same dollars, which the assumption was $1.6 billion in the five-year plan, to buy back shares. The way we think about it, Evren, that's a starting point to say that, well, it would be kind of neutral. We could buy back shares or we could make the acquisitions. The point is, for the long-term, we see the acquisitions as more strategic and more compelling. That's why we always talk about the priority for us being our acquisition strategy. If you look at the past, where we've been, and the importance of the acquisitions that we've done, the importance to VF Corporation and our returns, they've obviously really been critical.
For the long-term standpoint, that's the way we think about it. We also know that we're not forced to do an acquisition. There's no one twisting our arm to say we have to get one done, and we will. We would be more aggressive on the buyback if we just didn't see the right opportunities. That's how we think about it.
The one perspective I have on that, and you now know that Rick Wood and I have both been here for 17 years, is that if I look back at-- That doesn't seem like that long to me because time flies when you're having this much fun. 13 years ago, we didn't have an outdoor coalition. We didn't have a Sportswear Coalition. We didn't have a contemporary coalition. We didn't have a very big international business, and we didn't have any direct-to-consumer business other than an outlet division in Reading, Pennsylvania. We've deployed our capital to create a much bigger company that can continue growing into the future. The challenge for us, as the leaders of V.F., is how do we get from where we are, from 11 to 17?
How do we get from 17 to whatever the next number is going to be, and from that number to the next? Our company will be 114 years old this year, and our job is to put it in a position so that the generations that follow us can continue to have the success and fun we're all having. To do that, we know we're going to constantly need to reshape our portfolio. In the last seven or eight years, we've sold 12 or 13 businesses, I'd guess, when you look all the way around.
Yep.
We've added a bunch. That's much more of our business model. One reason that we can do that, as you heard from Tom Glaser and from Bob, we're pretty good at managing the complexity of that. The proof of that is we continue to get more profitable every year as we get more complex. That's the proof to me that we can handle all that. I think we believe our capital is much better deployed shaping the future of the company so that we can get beyond 17 when the time comes.
It's great. We ask ourselves that question a lot.
Are there other questions?
Yep.
Hey, guys. Michael Binetti with UBS.
Michael.
Thanks a lot for all the detail today. It's very helpful.
First person at the door today, Michael Binetti.
That's right. You called it out early on in the slides, I'll bring it up. Maybe it's a good question for Karl-Heinz Salzburger, actually. You called out Europe as the lowest regional growth rate through 2017, and obviously, it's a tough market right now, but your market share in the categories that you're in in Europe is much lower than the market share that you have for those same brands in the U.S. Maybe you could help us think about the components of growth that you're thinking about in Europe, and frankly, those of us who put on our optimistic hat would say, part of the V.F. story is they do have this big lump of revenues in Europe, but their absolute penetration in these categories is very low and can be very much higher if they achieve what they have in the U.S.
Sure. I think we need to start talking about the businesses we have. The outdoor coalition probably is the first one. The North Face is one of our large brands, and together with Timberland. The European outdoor market is very fragmented. Compared to the U.S., there are many players, and there are many players in the regions, in the countries. I've been with The North Face now since 1997. From day one, we always went for a pan-European strategy, which worked off. We are now the largest company, the largest brand, The North Face in Europe. If you look from a regional point of view, we are not, which is a great opportunity. Let me give you an example. Germany. In Germany, there's a company which is bigger than us. They have 200 stores. We probably have 10 in Germany. That shows how much we can do.
The same is true in France or in other countries. In outdoor, for sure, we can do. The second possibility, the growth opportunity we see going forward is, I think you have seen from Mike's slides, we have less penetration than U.S. in terms of DTC. We just started advance in The North Face rolling it out in other countries. Timberland, which is our largest brand in Europe, we're only active in the U.K. at the moment. We plan to roll out Europe a little bit later this year. Good thing is we have the know-how now. We made our mistakes. We know what it means rolling out DTC in Europe. We're pretty confident on that.
One of our assumptions, Michael, about Europe is in the next 5 years, is we assume no change to the current environment. The current environment there is pretty rough. We don't see any signals that it's going to change. You're talking about Europe, and that means we assumed Italy stays the same, and Spain stays the same, and France and Germany and the U.K. We've assumed no better and no worse than the current environment. That's a pretty rough environment. Should that change in either direction, it'll have an impact on what we're capable of doing.
If I could just follow up with one, maybe a jump-off for either Eric or Bob. How are the multiples you're seeing in the acquisition market right now? How attractive are they? Maybe if they don't come in, obviously, it's been a pretty good market. How patient would you be in deploying the capital elsewhere if there's not an opportunity here?
Michael, it's interesting over the years just to watch the current market valuations and what acquisitions are getting done at and that kind of thing. In periods when the market was really off and our sector was really off, deals really weren't getting done. I know we heard a lot that, wow, there are going to be great deals and really not have to pay a lot for a great brand. The problem was great brands weren't for sale, not at those valuations. Now, with much, much higher valuations, if you look at some of the transactions that have taken place, they haven't been so wacky. A lot of times It comes down to a willing buyer and a willing seller, and it has to work from both sides, and that's the way we look at it.
We're just not going to overpay because the valuations are higher. It has to give us the kinds of returns. We talked about our return on invested capital earlier and our targets, and we just don't make decisions that say we're going to pull that down. It's just not good for our shareholders. We can be patient. Said that earlier. We absolutely know that we can, and we have been. Hopefully, we've demonstrated that in the past, and we will be. We're not going to overpay. You guys don't have the perspective. You have the perspective of the transactions we have accomplished. You don't have the perspective of all the ones we've walked away from. Many more than we've gotten done.
Absolutely.
Hi. Scott Krasik from BB&T. You mentioned valuations are high, I don't think you've done a divestiture since Barneys. What are your thoughts, or what are the criteria you look at when pruning the portfolio? Separately, are there any synergies to be gained by combining the Sportswear Coalition and the Contemporary Brands Coalition?
Sure. We actually go through an exercise at least once a year where we look at every one of our brands, Bob mentioned it, through a TSR lens. We ask of every brand what shareholder value is it creating within its five-year plan. We look at their submitted five-year plan to see if they are contributing to our total shareholder return. We also ask if there's a strategic reason to be in that business. It's a two-part question: Is there a strategic reason to be in it, and is there a financial reason to be in it? Against that financial reason, we look at current multiples. We say, "Well, if we sold this business and deployed that cash against buying back shares, would that improve our TSR?" Through that, we're always looking at our businesses on how they can create the most value for our shareholders.
We do that rigorously. We do it, I say all the time. We do it at least once a year. I'm obviously not going to share any deeper thoughts about any particular businesses, know that we have all of that information done. Before I get to the sportswear contemporary, Bob, is there anything you wanted to add?
No, it's just that there's a lot of rigor around the process. We use an internal TSR model. That's exactly what Eric said. That's just how we think about it. If it's beneficial to us to exit a business. We look at all the characteristics. If we exited a business, say, a slower growth business, it improved our overall metrics, revenue growth would've been stronger or gross margins, which is a really important factor in a PE. If we exited a business it expanded our gross margin by a lot, big driver of PE, driver of TSR, we'll look at it. That's how we look at it. We think it's a pretty thorough view.
Is there efficiency in combining sportswear and contemporary as one business? The answer would be yes. We could take cost out if we did that. That's the obvious answer. Our choice is not to do that, recognizing the differences in those businesses. While they appear similar on the surface, there's speed difference, there's location differences. The contemporary business really should be in California, and the sportswear business really should be in New York. There would be some savings, but we don't think that would improve our overall earnings because we think we would lose some of the momentum we have in each of the businesses.
There's a question back here. There's one here, too.
Yeah.
Good afternoon. Christopher Svezia from Susquehanna. Question, Bob, for you on gross margin. 50 basis points for the next 4 years, you're getting 60-70 just from the mix of the business and obviously some room on supply chain, it seems like. Can you just maybe walk through, in terms of importance, what the offsets to that is? Secondarily to that, if you had upside to gross margin, is it fair to say that that incremental upside would be reinvested back into, whether it's marketing or some areas within the business?
In terms of the offsets, I won't have a lot of specifics behind that. The offsets are, Tom mentioned earlier that we're entering a period of where it looks like costs are going to go up. We have a general assumption that we'll be able to offset that with pricing, given the strength of our brands, it's always a little hard to tell. There's not a lot of specifics around that, Christopher. We like to err on the side of caution and put out numbers that we know we can achieve. The second part was
Taking any upside.
Would we reinvest? Yeah, it's possible, and we have done that. It's possible and maybe likely. It's kind of how we manage our business on an annual basis. We establish our plans, and we're always looking for some upside that we can reinvest in the business. Until we see that that's not paying off, and it has been paying off, right? Until we see it's not paying off, we'll likely continue to look at the business that way. We look at every single year. We establish a target. We say, "If we have some room to reinvest, we'd like to do it." Once again, until we see that we're just not getting the returns. You heard Steve talk about we now have the capability of measuring those returns, which is a very, very important part. That's something we did not have in the past.
It's something we think very, very few of our competitors have as well, is to measure the return on those investments.
Not just measuring the returns, it's measuring the copy testing of the ads. If somebody brings us a big market opportunity with a copy-tested approach to communicating what they want to get done in a very fertile market where we could take market share in a very profitable way with effective advertising spend because we've measured all that, we're going to green-light that is probably the answer, and particularly if it's strategically important to accomplishing one of our core objectives. What we used to do and what many people in our industry do is kind of-
thumb in the air and say, "That feels good. Let's do it." We've added a lot of science that helps inform those decisions, as Stephen Dull talked about.
Hi, John Kernan, Cowen. Steve, I guess this would be for you. I think that The North Face revenue guidance for this year is for high single digits. There's obviously some weather dislocation that slowed things down. What gets the revenue accelerating to that 12% target? Is there a channel, geography, or category that re-accelerates the revenue?
Sure. Great question. I would tell you, it's what I started my conversation with. It's that activity-based model and the ability to stretch this brand to new consumers, new activities. That's just not here in the U.S., but it's in Europe and it's in Asia as well. It's certainly looking at growth in our Asia platform. We're looking at growth with our key wholesale partners in each one of these markets where we're able to place just not our outdoor, but our spread of mix across the activities and across those categories. It's really just a focused activity-based model, the categories of business, key wholesale partners, regional expansion, and absolutely D2C will be a big part of that.
Within D2C, how we connect from a The North Face perspective, The North Face is our largest e-commerce business within the V.F. portfolio. We've learned a lot through that business that's being applied to our other brands. We see just great potential, knowing where we connect today, what we can do to connect further in the future. Are there any other questions? Hard to see. We have one over here on the side.
Thanks. I was wondering if you could talk to us a bit more about China and the supply chain. As mentioned in the comments, it is going to become increasingly more expensive to produce there, and you laid out some plans to shift production to other areas. Could you add a little bit more color to that? For example, frankly, how difficult, what the timing is, what the skill sets are of the people in the various countries, and how easy it is to make those transitions.
Sure. Great question. I'm going to delegate that question to Tom Glaser, who is the best person in the room to answer that question.
It's been a bit tricky because we look at the situation on the ground in China, honestly. We see the wages go up. We're ourselves positioning, I will call it a gradual transformation, a very thoughtful transformation, because there's no other country that has the capacities that China has. Quite frankly, I look at the trade data every month and every year. They're holding on to their market share. I guess that's my story. I'm sort of sticking to it. I think that China will eventually, for our industry, people will reposition out over time. I think it depends on the product category you're in, what that means for your business. Footwear, we have a strategy. For Jeanswear, we have a strategy. For packs, we have a strategy. All those are different.
Some of that will mean repositioning to other countries in Southeast Asia and South Asia. Some of it will be repositioning more back to this hemisphere. It'll depend on the characteristics of that individual brand, the speed requirements, the margin requirements, and the availability of raw materials. It's been a great story. I've spent a pretty big chunk of my career actually repositioning supply chains into China. I didn't think it would quite happen this quickly. I'm going to think I'll spend a chunk of my career gradually repositioning out of China. I guess that's the natural evolution. Having said that, China for China is a very big deal for V.F. and China for the region. In a sense, China may lose export share. Then reposition that back for their internal markets. We are still going to be well-positioned in China.
It will just be well-positioned in a little bit of a different way. Did I answer your question there?
Are there any other questions?
There's one back there.
There you go. It's hard with my glass.
Yeah.
Thanks. Maybe can you guys talk a little bit about DTC? The information you provided in the U.S. was pretty impressive in terms of all that data. 1, do you have that data internationally? Because I don't know how far out the e-commerce is internationally. Then 2, can you just talk about the capital needs for the increase in DTC over the next five years?
Your question about the U.S. DTC, are you talking about the Atlanta example where?
Right. Do you have that data as you go internationally?
Sure. The answer to that part of the question is, do we have that kind of consumer data, where their exact address is, where we're shipping to in Asia? No, we don't have that. Do we have that in Europe? Not really. We have some information, it's nowhere near as precise as the information we have in the U.S. Will that come? Yes. Will we be advantaged because we'll have developed skill at it here in the U.S.? Yes, because we're real good at sharing things across our company. As that information becomes available, Mike Gannaway talked about our director consumer council, which we have one in the U.S. and one in Europe and one in Asia, Mike's responsible for making sure they all speak to each other as well.
Everybody's aware of what we would call the best practice at that here in the U.S. and kind of anxious to get at that.
In terms of the capital required to execute the 640 stores, Bob, do you want to make a comment on that?
Well, I guess the point I'd make there is, we don't necessarily break out how all of our capital is spent. This year, what we did say is we're going to open about 160 new stores. The plan, as you saw with the 640 stores or so that Mike talked about, will be relatively stable. There's not going to be a big increase in capital that needs to be allocated to new stores over the five-year period. Pretty consistent.
Okay. Mitch. Mitch, can you hold on a second? We got someone coming over here.
Yeah. Hi. My question is-
Too bad.
That's okay.
The microphone has to work for you. Please go ahead. Yeah.
Okay. A question back on acquisition. If you look at, obviously, your biggest acquisitions over the last decade plus have been Outdoor & Action Sports, and they've been more sort of domestic-oriented, but you've obviously done a great job growing internationally. Recognizing that many of these markets are still undeveloped in Europe and Asia, Outdoor & Action Sports in particular, and that they are so fragmented, do you think that going forward, that can be more fertile ground for acquisitions for you folks over the next, say, five, 10 years?
Yeah. The answer is yes. Don't want you to think we haven't been consistently looking at international acquisition opportunities because we have. We haven't been as successful at getting them done, that is for sure. One of the things that enters into that is it's hard to find larger international Outdoor & Action Sports companies that actually move the needle for us. Having said that, we are always looking. We have an internal M&A team, and that team is constantly working with Karl-Heinz and his team in each market, and they're working within each of our coalitions. They'd be working not only with Karl-Heinz, but they'd be working with, using The North Face as an example, with Steve's team in San Francisco on globally, what do you see taking shape in the industry? We're looking.
The only reason we haven't gotten more done is we weren't willing to pay the price, and there weren't the right opportunities available. I can't remember us going through a year.
Right
We've been having dialogue with somebody about that. I hope it does happen that way.
I think that.
There you go.
It's working on.
Could you turn that off now?
A couple housekeeping items, I guess, on the DTC growth. For one, is there a specific global comp that's embedded in your guidance? I might have missed it if you gave that or maybe you didn't.
Yeah. Low single digits.
Low single digits. You mentioned the unit growth on DTC. I don't know what that is on a percentage basis, is it square footage growth sort of along the same lines? Are the stores getting bigger, smaller? I guess it kind of depends on the regions that you're opening. Should we think about it as about the same? Whatever that unit growth pencils out to be, should we think of it as similar square footage growth? I'd say similar, but if anything, maybe a little less. You learn all the time, right? Especially in stores. Sure.
Smaller generally gives you a little bit better returns. Similar, not incredibly different, but maybe a little less. Our stores, I think, are a little bit smaller.
Then on the margin, Bob, I think you mentioned going from five and a half % of sales to 7% of sales involved.
That's right. Yeah. Right.
That implies, I think given the revenue growth, sort of a doubling of the marketing budget, somewhere along those lines, right?
Yeah.
Where do you see that money really?
Yeah. The three largest brands would get a big, big piece of that. In fact, specifically, we would expect our The North Face brand. Our plan would be to actually expand The North Face marketing percentage to more like 8%. That would probably be one of the highest. It would be one of the highest in V.F. Both Timberland and Vans would be at about the 7% range. As those faster-growing, larger businesses, obviously, where we spend more and a higher percentage in those, it lifts all boats, in terms of the percentage. That is kind of how we think about it. Please.
Thank you.
Kerry Kelly at American Trust Investment Advisors. I have kind of a broad brush real estate strategy question for you. As you build out your brands and as you build up your DTC presence, I guess I am thinking about it from the perspective of walking into a mall and thinking about the touch points for a V.F. Corporation, whether it is a Timberland store, a Vans store, wholesale doors. How do you think about segmentation with respect to. How do you think about saturation? Again, I know you have plenty of runway.
Yeah
How do you think about it 5 years from now, and what are your concerns?
Yeah. We looked at our 5-year plan by brand, we don't see saturation happening in any market with any brand. It's because we have so few stores. The North Face has 101 stores worldwide. We don't think that we're anywhere near saturation. We do think about the impact of where we place our stores. At the end of the day, if we achieve these numbers, we're going to be 75% a wholesaler and 25% a retailer. We never forget the fact that the biggest piece of our business is being a great partner to our wholesale partners. I'm going to ask you to comment some on how your group thinks about store placement and also segmentation because Vans has a product segmentation strategy.
Right. Where we place DTC in the contrast to our wholesale business, it's something each of our businesses watch very carefully. It's embedded in our 5-year plan.
First, about our wholesale partners. Where are they? Who are they? What are their expansion plans compared to where they are today? Where can we use our store to build awareness, and in essence, help build their opportunities as well? It's brand by brand, and it's really looking very carefully first from wholesale partners, where will our stores add value? Then to Eric's point on segmentation, we build our product lines with channel segmentation in mind, thinking about the partner. What part of our consumer group is entering that channel to purchase? Really being mindful around placing the right products in those right points of sale and balancing our stores to really support and build awareness.
Andre? David.
Thank you. David Glick from Buckingham Research Group. I'm wondering as I look at your plans in Jeanswear, maybe you're being a little bit conservative given the headwinds you've been facing in the mid-tier department store channel, and you described some tests in the channel above that within department stores that seem to be pretty encouraging. I'm just wondering if perhaps you're near a turning point in that overall department store channel, given some of the changes that are happening at the moment.
I'd be happy to have Scott talk about his conservative plans.
David, you've put me in a bad spot.
Air it out.
No, I think you're right, David. I think we are seeing a little bit of a change. I think it really started, though, with the innovation and the product that we're bringing to the market. It's really product right, it's market right, and it's customer right. That's a really big headwind for us. In addition, you mentioned the mid-tier channel, and we kind of went through a bad period of time with the mid-tier channel, went through a bad period of time with the mass channel. Both seem to be navigating out of that in a really positive way. Very happy with what I've seen in the mid-tier channel over the last 60 to 90 days and where it's going and some of the stuff that you probably see, too.
I do think we're heading into a really good stage and maybe a little bit conservative, but you have to remember where we're coming from, so I don't want to get too far ahead of ourselves. As we build this momentum, I want to keep it on track and keep it rolling.
There you go.
Is that it? It's hard for us to see. Okay. If there are no more questions, I just want to thank all of you for your time and attention today. We are very excited and encouraged about the future of our company. I hope you heard from our management team that we're not only committed to this, we think we have the capabilities in place to get done what we promised to get done today. When we lay out a plan, we promise it to ourselves, and we promise it to all the V.F. associates, and we promise it to you, that we're going to do whatever it takes to bring those plans to life. We have a pretty good track record of doing that, and it looks like we have pretty good opportunities. We haven't assumed any help in that plan from macroeconomic situations.
We've assumed a pretty sluggish global economy and us outperforming everyone in our space as we take these brands to market and connect with consumers through the sciences we have. I think at this point, are we going upstairs after this? Yeah. Matt?
Folks, we're back upstairs. A little bit of mingling, a little bit of just an opportunity for all to stand out and to see up there.
Yeah.
Continue our conversation.
If you didn't hear that, we're going to all head upstairs. Management's going to head upstairs. If you'd like to join us to have some further discussions, we'd welcome that. Thank you so much for your time and attention.
Ladies and gentlemen, please join the V.F. executives on the fourth-floor gallery for refreshments. You may use the stairs and the smaller elevator. At the moment, the larger elevator is not available to us. Thank you.
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