NEW YORK — Calvin Klein hopes to make a splash in America with its own stores as part of a drive to become a $7 billion company.
At Phillips-Van Heusen's annual shareholders meeting on Tuesday, chief executive officer Emanuel Chirico outlined a retail strategy to open full-price Calvin Klein white label stores in the U.S. over the next 24 months. If they work, the retail venture could evolve into a 100-door chain, with Calvin Klein boutiques in malls and prime shopping streets across America.
"We will open five stores in the fourth quarter of 2007 and five stores during 2008," Chirico said. "This is a platform for us to showcase the Calvin Klein white label better product to America. It will be in the best malls in America and has the potential for us, if this concept proves both from a marketing and profitability point of view, to be a 100-door chain over the next five or six years."
Opening signature stores is a growing trend among fashion brands, and one that has generated significant success for many companies. A Fashion & Luxury Insight survey compiled by the Milan-based Bocconi School of Management, Altagamma and Ernst & Young released last week highlighted that brands that have focused on growing their own retail operations — among them Coach, Hermès and Geox — are among those considered most highly by consumers and are among the industry's best performers.
Few details about the new Calvin Klein white label boutiques were revealed Tuesday, but Chirico elaborated to WWD after the meeting the reasons for making the move.
"The Calvin Klein brand has a little over 400 regular retail priced stores around the world," he said. "We wanted to try and have much more of a retail presence in the U.S. As the brand has grown since we acquired it, and we have de-levered our balance sheet, we have been able to now make investments into the brand to give us a space where we can showcase the Calvin Klein brand. Based on how those stores perform, we will determine where the next 75 to 100 stores would be."
Chirico wouldn't disclose locations for the first units, but said they will initially be mall-based, with the potential to expand into street locations in places such as downtown Manhattan, for instance. Calvin Klein is the top-tier brand at PVH and Chirico called it a "licensing machine.""When we took this business in 2003, it was doing approximately $2.8 billion in global retail sales under the Calvin Klein trademark," he said. "Today, that business has grown by 60 percent and we are doing over $4.5 billion in global retail sales in the Calvin Klein brand. We believe there is significantly more growth attached, but we are very careful how we manage the brand."
Chirico outlined the importance of the design team that steers an overall consistency in the brand's aesthetic worldwide — Francisco Costa for women's Collection, Italo Zucchelli for men's Collection and Kevin Carrigan for women's and men's white label and ck Calvin Klein. The ceo also pointed to Calvin Klein's marketing spending, which totaled $220 million last year. Calvin Klein Inc. brands were advertised and marketed in 48 countries and reached almost four billion people last year. The brand's presence has also been growing on the red-carpet circuit, which was driven home in a celebrity-filled video shown at the meeting that highlighted the power of the top-tier Calvin Klein Collection label.
"Collection sets the tone for the brand," Chirico said. "It's a relatively small business compared to the other two subbrands of Calvin Klein, but it is the essence of the Calvin Klein brand."
By the end of 2006, CKI had global retail sales of $4.1 billion. Of that, Collection accounted for $200 million, ck Calvin Klein for $400 million and Calvin Klein white label for $3.5 billion, including jeans, underwear and fragrance. The underwear category has more than $700 million in global retail sales, while jeans represents more than $1 billion.
"Jeans is one of our largest categories," Chirico said of the Warnaco Group-licensed business. "This business has been strongly repositioned and reinvigorated. We have seen a tremendous amount of growth in the last 18 months and expect that to continue in the next three years."
Calvin Klein's fragrance business, licensed to Coty Inc., has $1.2 billion in global retail sales. Chirico highlighted the success of its most recent launch, ckin2u, which targets a younger customer.
"We planned this business around $75 million in sales, and the new projection for this year is to do well over $135 million," he said.As for the brand's future, he said: "Calvin Klein is not just about image and brand, it's also about growth. We believe over the next five years, we can grow the Calvin Klein franchise by an incremental $2 billion to $3 billion worldwide. That will take us to a size of about $7 [billion] or $7.5 billion as a global brand, and position the company in a great area to continue to grow this franchise as we grow our top line and our bottom line."
Calvin Klein is not the only business with a women's sector that PVH hopes to grow. Chirico also pointed to Izod as a key opportunity.
"We have reacquired the license from our former licensee Kellwood, and we are launching this business for fall 2007," he said. "Over the next five years, we see this business having the opportunity of being at least a $200 million wholesale business. [It will allow us] to see whether we have the capabilities to enter the wholesale sportswear environment with our other brands...in order to extend those brands and take those potential licensees back in-house and create a real growth strategy for the company as we go forward."
PVH also continues to pursue an acquisitions strategy, though after the meeting, Chirico downplayed that there was a particular purchase on the horizon.
"We continue to be looking for branded acquisitions, strong brands that we can layer onto our platform, be it a men's sportswear, a dress shirt, a neckwear or a retail opportunity for us," he said. "And now that we are getting into the women's side, we are really looking for strong brands that we can layer onto our platform and incorporate into our business model. The key would be to continually look for brands that would fit into our portfolio."
At the annual meeting, Mary Baglivo and Jim Marino were ratified as new board members. While they do not replace specific board members, Bruce Klatsky, Marc Grosman and Joel Goldberg elected not to be nominated this year.
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