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NEW YORK — Phillips-Van Heusen Corp. is freezing development of Calvin Klein full-price retail stores as the company continues to downsize its outlet retail operation, Emanuel Chirico, PVH chairman and chief executive officer, said Thursday.
Although Calvin Klein is a highly profitable growth engine for PVH, contributing $154.6 million, or 46 percent, of operating income in 2008, PVH’s outlet retail business has been a drag on financial performance.
Speaking after the company’s annual meeting at The Graduate Center of the City University of New York here, Chirico said Calvin Klein retail stores have been hurt by the recession and won’t expand until they begin to meet performance goals.
Worldwide retail sales of Calvin Klein merchandise, including those through licensees, have grown 16 percent a year since PVH acquired the brand in 2003, and last year rang up $5.8 billion in overall volume. PVH believes it can add another $2 billion to $3 billion to that figure over the next five years.
However, the brand’s 10 freestanding “white label” stores have not met expectations. “Those stores are not performing from a sales point of view up to our benchmark levels,” Chirico said. “We love where they are located, we like what they say about the brand and how they represent the brand, but until the world stabilizes and we deliver the results, we won’t be opening any more of those full-price specialty stores.”
In addition, PVH will continue to shut outlet stores, with 150 closures expected over the next three years in addition to the 100 Geoffrey Beene stores already shut. The retail division, which includes Izod, Van Heusen, Bass and Calvin Klein outlet stores, contributed $894.6 million in revenue last year, but just 10 percent of operating income. Comparable-store sales for the division, which has more than 600 stores, declined in the mid- to high-single-digit range last year, and operating margins fell to 3.9 percent, down from its historic levels of 7 to 9 percent.
Half of PVH’s $2.49 billion in 2008 revenue came from its heritage dress shirt and sportswear division. The company managed to grow its dominant dress shirt position in department and chain stores to a 41 percent market share, up from 35 percent in 2007. In neckwear, PVH controls 50 percent of the market, according to Chirico, thanks to its acquisitions of Superba and Mulberry in the past two years.
Chirico drew laughter from shareholders and employees when he described the new Calvin Klein Body jean, being introduced this fall by licensee Warnaco Group Inc., as “a jean that enhances both women and men, in their own way — and you can figure it out yourself.”