NEW YORK — The clothing company that makes Wrangler and Lee jeans is breaking off its denim division to focus on its fast-growing outdoor and active wear business.
The major shift at VF Corp. is happening as Americans swap out jeans for yoga pants. That trend has fueled growth at Lululemon, Under Armour and Nike. Retailers like The Gap and Target have hopped aboard. Even traditional jeans makers have added stretch to their denim to catch up.
The change in what people wear is playing out every quarter at VF, which announced the split Monday.
In the most recent quarter, revenue from active wear surged 25 percent and outdoor revenue rose 6 percent. Revenue from denim increased 3 percent.
The company expects 6 percent to 8 percent revenue growth in its outdoor business this fiscal year and 13 percent to 14 percent growth in its active division. Revenue in denim is expected to be flat, VF Corp. said last month.
The company said Monday that it expects the tax-free spin-off of its denim business to generate annual revenue of $2.5 billion.
The yet-to-be-named outdoor and activewear division, which includes The North Face and Timberland, Altra, Icebreaker and Williamson-Dickie, is expected to generate annual revenue of around $11 billion.
That division will move from North Carolina to the Denver area in the next year. The new, company that operates the denim and also its outlet businesses, called NewCo, will remain in Greensboro, North Carolina.
The separation is expected to be completed in the first half of next year. It still needs final approval from board members.