Most Recent Articles In Financial
Latest Financial Articles
- Europe Markets End Day With Varied Closes, U.S. Stocks Muted
- Market Volatility Erodes Consumer Confidence
- Update: U.S. Markets Drag at Open, Europe Edges Down, Shanghai Recovers
More Articles By
NEW YORK — PVH Corp. is looking to close its designer gender gap.
This story first appeared in the August 29, 2012 issue of WWD. Subscribe Today.
On a Tuesday morning conference call to discuss the group’s better-than-expected second-quarter earnings and sales, Emanuel Chirico, chairman and chief executive officer, told analysts the company’s two designer brands, Tommy Hilfiger and Calvin Klein, are both weighted toward men’s sales, with Hilfiger about 60 percent and Klein about 55 percent men’s.
“If you think about both of our lead brands, Calvin and Tommy, the women’s business is always one that we’ve looked at, that we felt should be bigger and had bigger opportunities,” he said. “If you look at the women’s potential in the market, the women’s business is much bigger than the men’s business.”
He then stated that two-thirds of the opportunity for growth with the designer brands is expected to come from women’s, versus one-third from men’s. While both brands are global in scope, that two-to-one ratio of opportunity is nearly identical to the breakdown of sales between women’s and men’s apparel in the U.S. which, according to The NPD Group, were $110.16 billion and $55.72 billion, respectively, in 2011.
“I think if we have fallen down anywhere on the brand level, our execution has just been stronger on men’s product than it has been on the women’s side of it,” Chirico continued, “and I think some of the initiatives, both with our licensing partners on Calvin and internally with our Tommy product both in North America and Europe, we believe has significantly been improved and the positioning there has significantly improved.”
Focusing primarily on Calvin Klein, he cited numerous programs expected to help boost the women’s share of the brands’ businesses from their current levels of about 40 percent for Hilfiger and 45 percent for Klein. He described G-III Apparel Group Ltd.’s efforts with Calvin Klein dresses, suits, handbags and accessories as “just off the charts, strong” and noted an excellent performance by Klein footwear licensee Jimlar Corp., with royalty revenues for G-III and Jimlar rising 15 percent in the second quarter.
The Klein jeans and underwear businesses, rights to which are held by Warnaco Group Inc., have been problematic “due to uncertainty in Europe and the weakness we see in our global jeans business,” the ceo said, leading PVH to plan royalties from Warnaco’s licenses in Europe at contractual minimums for the year, about 10 percent below 2011 levels.
The ceo expressed confidence in Warnaco’s plan to turn around the jeans business, citing “some of the great design talent that they’ve brought in, the investments they’re making in their infrastructure and merchandising.” He expects benefits from those efforts to be realized beginning in 2013 with top-line growth resuming in the second half of next year.
While Warnaco works to rectify its Klein jeans business and streamline its European operations, PVH next year will take back the CK Calvin Klein bridge apparel and accessories in Europe previously licensed to Warnaco, converting royalties from a licensee into direct revenue. Chirico said PVH is at the start of a “total repositioning of where the product was. We’re not going to be using the CK logo, so it’s not going to be CK Calvin Klein. It’s going to be Calvin Klein product.…We’re going to start with men’s next year, fall of next year, and then go into women’s in fall of 2014.”
Late Monday, PVH reported that its net income for the quarter ended July 29 rose 29.3 percent to $87.7 million, or $1.19 a diluted share, while revenues eked out a 0.2 percent increase to $1.34 billion. Hilfiger revenues rose 4.2 percent to $721.9 million and volume at Klein, which depends more heavily on licensing royalties, expanded 4.7 percent to $251.2 million. Excluding special items, operating income at Hilfiger was up 28.5 percent, to $97.3 million, while Klein’s contracted 8.8 percent, to $60.2 million, on a heavier investment in marketing.
The strong performance, coupled with upbeat guidance for the remainder of the year, helped boost the New York-based company’s stock $4.42, or 5 percent, to $92.91 a share Tuesday. Earlier in the day, shares hit a new 52-week high of $94.74.
PVH’s strength in men’s is in part derived from its roots with the Van Heusen dress shirt brand. The Heritage Brands unit, which houses that label, saw a 9.5 percent drop in revenues, to $363.5 million, as operating income dropped 23.2 percent to $23.2 million. With product costs declining from a year ago, average unit retails up in the midsingle digits, Izod among the vendors anointed to be part of the new J.C. Penney and the closure of the Izod women’s and Timberland businesses approaching their anniversaries, Chirico sounded an optimistic note on the segment.
“Clearly, the Heritage business is in the midst of a major turnaround,” he said.