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The North Face, Inc. Business Information, Profile, and History

2013 Farallon Drive
San Leandro
California
94577
U.S.A.

Company Perspectives

The North Face is committed to pushing the limits of design, so that you can push your limits outdoors--never stop exploring.

History of The North Face, Inc.

The North Face, Inc., is a manufacturer and distributor of high-grade equipment and apparel used in mountaineering, skiing, and backpacking. While the reputation of North Face was built on outfitting expeditions, the company's growth in the 1990s came through the introduction of high-tech apparel in upscale retail stores. With Summit Shops, North Face established its use of a "store within a store" concept. In 2006, there were approximately 100 Summit Shops located within retail shops in the U.S. There were also ten North Face retail stores scattered across California, Colorado, Illinois, Massachusetts, New York, Oregon, Virginia, and Washington. Overall, North Face products could be found in over 3,500 locations across the globe. The company fell on hard times in the late 1990s and was eventually purchased by VF Corporation in 2000.

The Early Years: 1965-73

According to the 1996 company prospectus, the name North Face originated with the company's founders and comes from the fact that the north face of a mountain in the northern hemisphere is usually the most formidable and challenging for mountain climbers. North Face was founded in 1965 by outdoor enthusiasts retailing premium-grade backpacking and climbing equipment. North Face began to wholesale and manufacture backpacking equipment in 1968. The business continued to grow and expand. In the early 1970s North Face added outerwear to its product line.

Innovation in Product Design: 1975-90

Innovative product design and consistent development and introduction of new products have always been North Face's greatest strengths. In 1975 North Face introduced a benchmark in the outdoor equipment industry with its geodesic dome tent. This design became the standard for lightweight, high-performance tents used in high-altitude and polar expeditions. The geodesic dome also became very popular for general backpacking and camping as well. The same year North Face also introduced another original, sleeping bags incorporating shingled construction of synthetic insulation. Like the dome tent, these sleeping bags have become the industry standard.

In the early 1980s the company launched its "extreme skiwear" line. Another addition to the North Face product line came in 1988, when the Expedition System was introduced. A complete line of severe cold weather clothing consisting of integrated components, the Expedition System was designed to be used together in various combinations. According to the company, there was wide use of this clothing system by world-class mountain climbers. By the late 1980s North Face was the only manufacturer and distributor in the United States of a comprehensive line of premium-grade, high-performance equipment and apparel used in mountaineering, skiing, and backpacking.

Shaky Ground for North Face

While the reputation of North Face products has remained sound, internal decision-making was occasionally questioned. During the growth phase of the 1980s, the company attempted to manufacture all of its own products. This led to problems of obsolete materials, large amounts of capital invested in an inventory of finished goods, and late delivery of high-demand products. However, these were not the only detriments to the financial health of North Face. In the late 1980s, North Face opened outlet stores to sell lower-priced products in an effort to dispose of obsolete materials. The product reputation of North Face was based on a high-end, or expensive, association with the inherent product quality. The lower-priced products confused or missed the intended consumers and did not help the company's overall image. Also, these outlets were not well received by North Face's wholesale customers and were eventually closed. All of these business activities had a negative effect on North Face's finances and launched the company into the next phase of its history.

In May 1988, Odyssey Holdings, Inc. (OHI) acquired the company, known at that time as North Face Corporation. OHI owned about 30 companies in the outdoor and brand-name apparel industry and was at that time headed by William N. Simon, who soon became president of North Face.

In January 1993, a new executive staff was recruited to make needed changes in North Face's operations. Among those newly recruited was Marsden S. Cason, who was at that time the president of North Face and a director and executive officer of OHI. Some of the significant changes initiated by the new management team included hiring experienced executives and operating managers, establishing a focus on sales and gross margin, expanding contracted sources of goods and materials, closing discount outlets, and discontinuing unprofitable product lines. Eventually, as a result of these initiatives, the company would realize a significant increase in sales and profits. However, in 1993 the parent company, OHI, filed for protection under Chapter 11 of the U.S. Bankruptcy Code.

A Dramatic Turnaround Beginning in 1994

North Face continued to operate at a loss until 1994, when the strategic changes mentioned began to take a positive effect; 1994 was a year of significant transitions for North Face. On June 7 the company was purchased at public auction for $62 million by a group consisting of J.H. Whitney & Co., Cason, and William S. McFarlane. On June 8, 1994, TNF Holdings changed its name to The North Face, Inc. Also in June 1994 Cason was appointed CEO of North Face.

Into the New Millennium: Opportunities, Threats, and a Look to the Future

One of the inherent weaknesses of being in a focused, niche industry, according to experts, is attempting to sustain growth in a field with a limited number of customers. This is what necessitated the introduction of Summit Shops selling Tekware as North Face attempted during the 1990s to obtain a share of the leisure apparel industry. Such a shift represented a major departure from traditional North Face territories. North Face's success in this new venture depended, in part, upon the buyers of casual wear, a market that can be fickle. For North Face, entering this market could be seen by industry observers as either a weakness or an opportunity. In addition, another possible weakness that presented itself was overdependence on contracted vendors to supply the majority of the company's manufactured goods.

The largest area of opportunity that North Face was involved in was the expansion into the casual apparel industry with the introduction of "Summit Shops." Another area of opportunity for North Face was the possibility of future government contracts for tent sales, given the company's longtime association as a supplier to the U.S. Marines Corps. Finally, further development and introduction of new and innovative designs of products in the future seemed to be a likely avenue for North Face to gain or retain market share.

Nonetheless, North Face faced very real threats to its future growth. While the company remained subject to the same kinds of business threats that any business faced, such as major shifts in consumer tastes and preferences, its most prevalent threat was competition. Archrival Patagonia, for example, had historically carried a very similar product line. And there always loomed the threat of new competition because of relatively low barriers to entry and the possibility of a breakthrough in product design.

While North Face had weathered some rough and challenging times, the company seemed by the mid-1990s to be on firm footing and ready to begin another new phase. North Face recommended itself as a company poised for future growth by building on its strengths: brand-name recognition, product reputation and differentiation, innovative product design and diversity, aggressive entry into the casual wear market, and, as attested to by company profits and increases in the value of the company's stock, the decisive and able senior-level management that would continue to drive North Face's climb to success.

New Ownership

Shortly after going public in 1996, North Face began to face a series of problems that nearly led to its demise. Rumors began to spread that in certain instances, the company shipped products ahead of schedule and often over-shipped products to stores in order to record the sale. In 1998, James Fifield took over as CEO. He moved company headquarters to Carbondale, Colorado, which was near his home in Aspen. Overall, the move cost approximately $5 million. At the same time, Fifield and Leonard Green & Partners--a leveraged-buyout firm--announced plans to take North Face private at $17 a share. Shareholders balked at the offer claiming it undervalued the company.

It was at this time that North Face announced that it was considering restating its results from 1997 and 1998 due to accounting irregularities. Share price fell from over $27 per share to $13 per share after the announcement and trading of its stock was halted for nearly a month. The company released its new figures which revealed that 1998 sales had been overstated by six percent, or $16 million, and earnings had been inflated by 42 percent. Sales and earnings had also been overstated in 1997. Slowly but surely, shareholders began to file class action lawsuits claiming the company had inflated its results in order to boost its share price.

Plans to take the company private failed and Fifield resigned his post in 1999. Company headquarters returned to California in 2000. By this time, North Face's financial condition had deteriorated significantly due to distribution problems and costs related to the failed buyout and the moving of company headquarters. VF Corporation, one of the world's largest apparel companies, swooped in just days after North Face announced that it was facing a Chapter 11 bankruptcy protection filing. VF bought North Face for $24.5 million in August 2000.

Under the wing of VF, which recorded $5.6 billion in sales in 2000, North Face received an instant cash infusion. The sale benefitted VF as well. The North Face brand gave it a stronger foothold in the outdoor apparel segment. In fact, North Face quickly became the cornerstone in VF's Outdoor Apparel and Equipment Coalition. This division included North Face, JanSport, and Eastpack. In 2004, Vans, Kipling, and the Napapijri brands were added to this coalition.

By 2005, North Face's financial problems were a thing of the past and demand for its products was strong. VF's outdoor apparel unit was experiencing significant year-over-year profit growth: 34 percent in 2003; and 61 percent in 2004. With the support of one of the largest apparel companies in the world, The North Face appeared to be well positioned for future growth. Indeed, the North Face logo would no doubt remain on the backs of outdoor enthusiasts for years to come.

Principal Competitors

K2 Inc.; L.L. Bean Inc.; Patagonia.

Related information about North


North is one of the four cardinal directions, specifically the direction that, in Western culture, is treated as the primary direction: north is used (explicitly or implicitly) to define all other directions; the (visual) top edges of maps usually correspond to the northern edge of the territory represented, unless explicitly stated otherwise or landmarks are considered more useful for that territory than specific directions.

Definitions

North can mean:

  1. true north, the direction along the earth's surface toward one pole of the earth's rotation, namely the pole that is clearly on one's left when standing at the Equator while facing the rising sun.
  2. magnetic north, the direction along the earth's surface in which horizontal magnetic field strength has its most positive value (but see Flipping of planetary magnetic poles for an eventual event, so rare as to make unlikely any advance agreement on whether one or two retronyms would be involved in the replacement terminology)
  3. a loosely specified direction, usually within half a right angle of true north, especially when stating travel instructions in an area where directions of travel are constrained by an approximately rectangular grid of streets, hallways, etc.; often termed "northbound".

Etymology

The word north is traced to the Old High German nord, and the Proto-Indo-European unit ner-, meaning "left" (or "under"). (Presumably a natural primitive description of its concept is "to the left of the rising sun".)

Magnetic north and declination

Magnetic north is of interest because it is the direction indicated as north on a properly functioning (but uncorrected) magnetic compass. On the contrary, it is of interest that Chinese culture ever considered south as the proper top end for maps.

In Western culture (unless making a point about harmful effects, or the arbitrary nature, of boreocentrism):

  • Up is a metaphor for north
  • Maps tend to be drawn for viewing with either true north or magnetic north at the top (page layout)
  • Globes of the earth have the North Pole at the top, or if the earth's axis is represented as inclined from vertical (normally by the angle it has relative to the axis of the earth's orbit), in the top half.
  • Maps are usually labelled to indicate which direction on the map corresponds to a direction on the earth,
    • usually with a single arrow oriented to the map's representation of true north,
    • occasionally with a single arrow oriented to the map's representation of magnetic north, or two arrows oriented to true and magnetic north respectively,
    • occasionally with a compass rose, but if so, usually on a map with north at the top and usually with north decorated more prominently than any other compass point.

The notion that north should always be up and east at the right was established by the Egyptian astronomer Ptolemy.

"Perhaps this was because the better-known places in his world were in the northern hemisphere, and on a flat map these were most convenient for study if they were in the upper right-hand corner," historian Daniel Boorstin.

Roles of east and west as inherently subsidiary directions

It is worth noting that while the choice of north over south as prime direction reflects quite arbitrary historical factors, east and west are not nearly as natural alternatives as first glance might suggest.

Reasonably accurate folk astronomy, such as is usually attributed to Stone Age peoples or later Celts, would arrive at east and west by noting the directions of rising and setting (preferably more than once each) and choosing as prime direction one of the two mutually opposite directions that lie halfway between those two.

Chronology

  • Key Dates
  • 1965 North Face is established.
  • 1968 The company begins to wholesale and manufacture backpacking equipment.
  • 1975 North Face introduces a benchmark in the outdoor equipment industry with its geodesic dome tent.
  • 1988 Odyssey Holdings, Inc. (OHI) acquires North Face.
  • 1993 OHI files for bankruptcy.
  • 1994 The company is purchased at public auction for $62 million by a group consisting of J.H. Whitney & Co., Marsden Cason, and William S. McFarlane; company name is changed to The North Face Inc.
  • 1996 The North Face goes public; the Tekware line is launched.
  • 1999 Plans to take the company private fail; accounting irregularities force the company to restate its earnings from the past two years.
  • 2000 VF Corporation acquires The North Face.

Additional topics

Company HistoryClothing and Apparel

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