Rise of The North Face, and the decline of 'SCUBANOMICS'

“The wilderness rescued me. I have been shaped by my experiences in the great outdoors. Feeling comfortable in the wild gave me the confidence to be who I am, not who others want me to be.” - Ben Fogle

Deep Dive - The North Face

The North Face is a company that I’ve been interested in for years, so I’m delighted to take a deep dive this week. We’ll start at the start, with a focus on the strategic shifts along the way. They have grown beyond Patagonia, because they ‘sold out’ as Yvon Chouinard more or less put it. Is that true? Let’s see..

Believe it or not, the famous brand had its start in the form of a mail order company, selling climbing and camping gear, a company that was set up by Doug and Susie Tompkins in 1964, with a $5,000 bank loan. Two years later they set up their first shop in San Francisco. The iconic address was 308 Columbus Avenue, and believe it or not The Grateful Dead actually played at its opening! This tells us a little bit about the counterculture mindset of the couple, which was also a trait of hardcore outdoors people in that era. Maybe that still prevails! I should add that The Grateful Dead only formed in 1965, so it sounds a little better than it is. But, hey.

‘What a collection of people,’ the San Francisco Examiner wrote: ‘There were nattily dressed individuals rubbing shoulders with bearded, long-haired and sandal-clad beatniks from the neighborhood.’ With a sign above the door reading ‘Mountaineering Specialists’, the store stood in stark contrast to the Condor Club next door and asserted itself as anything but mainstream from the very beginning.

In 1967 they opened their second store - this time in Stanford, and had a band called Rite of Winter play at Columbus Avenue to mark the occasion.

Later that same year, the couple sold the stores for $50,000 to Kenneth ‘Hap’ Klopp, and soon The North Face was moved to the other side of San Francisco Bay, specifically to the Berkeley area. Under Klopp, the brand started making its own line, and in 1971, the ‘Half Dome’ logo was created by David Alcorn. It's simple and classic, inspired by the ‘Half Dome’ peak in Yosemite National Park, standing at 2694m and being the southernmost summit of Indian Ridge, named after its shape.

Incidentally, Tompkins and his wife went on to co-found the fashion house ESPRIT - which went on to become a multi billion dollar brand in its own right.

As much as The North Face is now a clothing brand, back in 1975 they were responsible for a major development in tent design.

This geodesic tent design was revolutionary. The original patented Geodesic structure designer, Bucky Fuller, was involved as a consultant, and the strength of what they designed was unmatched. “The first of its kind, the tent incorporated maximum efficiency with minimum materials.”

So, yet another outdoors apparel giant that started in more hardcore gear. A pattern is definitely emerging…

In the late 1970’s and 1980s, The North Face grew even more (beginning its move into apparel) by bringing out some new ski wear collections, and coined the company slogan: ‘Never Stop Exploring’. During that time, they designed some popular products like the Mountain Gore-Tex jacket and the Mountain Light jacket. "They expanded on this: “The Mountain Jacket and Pant are introduced, providing the same level of comfort and motion to climbers and trekkers as skiers. With GORE-TEX® in each piece, the suit is the genesis of an entire expedition apparel line developed with GORE-TEX® weather protection.”

TNF were the main sponsors when:

“The first all-female team summits 25,504-foot Annapurna. Led by Arlene Blum, it was also the first successful American ascent. Shirts and flags from the trip were emblazoned with the mantra, “A Woman’s Place is on Top.””

Later they also got the chance to design special clothing and gear for the International Trans-Antarctica Expedition. In the 1990s, a team of six went on a 3,700-mile journey in 220 days to raise awareness about global climate change. They completed the first ever non-mechanized crossing of Antarctica. The custom-made Gore-Tex jackets from that expedition have become super rare and are now some of the most sought-after pieces from The North Face. These jackets also played a big part in the brand’s later collaboration with Supreme.

In 2000 Hap Klopp sold out, and the entire company was purchased by VF Corporation for a deal worth US$25.4 million. Other brands included in its stable are: Altra Running, Dickies, Eastpak, JanSport, Icebreaker, Kipling, Napapijri , SmartWool, Supreme, Timberland & Vans. The group revenues were around US$11 Billion in 2023. You could say the ultimate outdoors aggregator.

The brand itself turns over around $3 billion a year, with sales slightly dipping in Q1 this year. According to VF’s quarterly report, ‘Sales at North Face, its biggest moneymaker, were down 5% year-over-year to $814.3 million on U.S. wholesale weakness.’ Interestingly growth did occur in 2023:

This can be compared to VF’s overall performance:

However investors are not keen, and haven’t liked this surprising reduced outlook, further putting pressure on the share price.

“Chief Executive Officer (CEO) Bracken Darrell said VF made progress last quarter in its turnaround efforts, noting that it continued to reduce inventory, and has been "rebuilding the leadership team.” That included the appointment Wednesday of former Spotify Technology (SPOT) CFO Paul Vogel to be VF's finance chief, starting in July. He replaces Matt Puckett, who had announced in February he would be stepping down.”

This reducing inventory is something I’m seeing a lot of. Like ourselves, the post Covid over-order on lines meant over-stocking, which in turn has led to a discount led environment. Hopefully this will correct itself before year’s end.

The future

This will be interesting. As we’re seeing with other similar brands, there is a critical mass - i.e. a max in sales without diversification. And in the case of TNF, they are obviously looking at new geographies rather than major innovation to grow. And one would have confidence in that strategy. A focus east together with the strong brand has worked. Rising to prominence in China by tapping into TV rap shows, the brand remains a top seller and is growing. But the Chinese like innovation. They were paying in shops with their phones long before it became the norm in the west. And this is the challenge. While TNF’s bright colors suit the demographic there, it won’t always be enough to maintain huge growth. Be the cool new shiny thing. That’s key in the APAC.

CRUA’s jacket project, and why

OK, so we’re getting into the jacket business. Why? It’s a natural extension for our product range given that we’re in the breathable insulation business.

We’re developing a camping/outdoors jacket. Our initial criteria are:

• Waterproof

• Breathable

• PFC free

• Fireproof (think campfire)

• Odor resistant (campfire again!)

• Camping features built-in (lots)

• Layered - inner and outer. Like a CRUA tent!

• CRUA Culla insulation

• Tough as nails, yet light.

First samples are due before the end of June. Exciting! We’ll keep you posted here.

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Until next week, and chapter 10, Go n-éirí leat!

Derek