Consumers are buying less denim, the company says. Separating the businesses will allow VF to focus more closely on athleisure and outdoor apparel.

(Bloomberg)—VF Corp., which rose to prominence on the strength of its Lee and Wrangler jeans, wants to pivot away from denim to focus on the faster-growing trends such as athleisure and outdoor apparel.

The spinoff to shareholders, which will allow VF to focus on brands like North Face, Timberland and Vans, should be completed in next year’s first half, the company said in a statement Monday.

VF’s online sales reached $731.6 million in 2017, according to Internet Retailer data. Sales on Wrangler.com were an Internet Retailer estimated $24.6 million in 2017, accounting for 3.4% of VF’s web sales, and Lee.com had Internet Retailer estimated online sales of $18.6 million in 2017, which were 2.5% of VF’s web sales. Combining the jeans businesses means Wrangler.com and Lee.com account for around 5.9% of VF’s total web sales totaling $43.2 million. VF is No. 88 in the Internet Retailer 2018 Top 500.

Sales of denim have slowed as consumers embrace active wear. Separating the businesses will allow management to focus more closely on it, VF said. Jeans production also has overlap with the other product lines, VF chief financial officer Scott Roe said.

“Over time, the business models of the jeanswear business relative to the remaining portion of VF have diverged,” Roe said in an interview. “We just decided that VF is not the best owner of these iconic brands.”

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The jeans business, which has yet to be named, will remain as a public company based in Greensboro, NC, while VF will move its headquarters to the Denver area—a mecca for outdoor sports enthusiasts.

CEO Steven Rendle said snapping up other companies or brands will be a central focus for the new, denim-less version of VF.

“We will be much more in the acquisition mode than we will in the divestiture mode,” he said in an interview. The company may also invest in digital and data analytics.

Scott Baxter, VF’s group president for its Americas West division, will be CEO of the new company, while finance executive Rustin Welton will be chief financial officer, VF said.

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The new jeans company would have estimated annual revenue of more than $2.5 billion, compared with more than $11 billion for the rest of VF.

In a conference call with investors, company officials said VF’s shareholders at the time of the spinoff will own 100% of both companies, with the final distribution ratio determined “later in the process.”

VF, once known as Vanity Fair Mills and founded in 1899 as Reading Glove & Mitten Manufacturing Co., has owned the Lee brand since the 1950s and Wrangler since the ’70s.

Barclays is acting as financial adviser to VF and Davis Polk & Wardwell LLP is acting as legal adviser.

The announcement confirms a report last week from the Wall Street Journal.

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