Shares of the New York-based firm fell $10.59, or 8.1 percent, to close at $120.09 in trading Thursday following the company’s disclosure late Wednesday of adjusted earnings for the first quarter of $1.47, 2 cents below analysts’ consensus estimates.
But in a Thursday morning conference call with analysts, Chirico, chairman and chief executive officer of PVH, stressed that initiatives to improve the struggling Calvin Klein jeans business acquired when PVH purchased The Warnaco Group Inc. in early 2013 would produce dividends in the second half. The generally easier second-half comparisons facing the company and industry should also help.
“The guidance takedown is a reflection of the near-term sales and margin pressure in our North American businesses,” he said. “I strongly believe that our long-term growth strategies for our Calvin Klein and Tommy Hilfiger businesses remain intact and that the planned strategic investments we are making in our Calvin Klein business will accelerate sales and earnings in the second half of 2014.”
Profit guidance for the full year was lowered 10 cents to a range of $7.30 to $7.40 a diluted share on an adjusted basis.
Although it puts added pressure on the bottom line, Chirico noted the company is boosting its capital expenditures in the second half by $12 million in North America and between $5 million and $6 million in Europe to produce the best possible presentation of the redesigned, retooled Calvin Klein jeans and underwear businesses in its customers’ stores and its own. “It’s night and day from what it was,” he said, “and we believe that’s going to really drive the business back and get the Calvin Klein brand, reposition designer jeans back to where their heritage has been as the brand that started designer jeans around the world.”
After essentially putting the Klein jeans business on hold with wholesale customers as PVH worked to integrate Warnaco and sought to make the brand less dependent on off-price distribution, PVH now expects to increase Klein’s retail square footage in North America 50 percent on the men’s side and 35 percent on the women’s side in the second half.
“And most of that is in top doors,” Chirico boasted of the men’s effort. “I think it’s an endorsement that, on the product itself, that the retailers are getting behind it. Now, clearly, the consumers get a vote and we have to see those sell-throughs.”
The ceo noted improvement in PVH’s retail businesses since the arrival of better weather in April. The Heritage Brands business stores saw an 11 percent decline in same-store sales during the first quarter, a figure that has moderated to a low-single-digit drop since the second quarter began on May 5. The Calvin Klein and Tommy Hilfiger retail businesses in North America are “on plan,” Chirico said, with gains of between 2 and 3 percent.
The ceo noted that most of the housecleaning in Europe for Calvin Klein is now behind the firm. He also pointed out that Tommy Hilfiger has resumed growth in Spain after more than three years of contraction but that conditions in the Italian market haven’t markedly improved.
Asked to update the status of PVH’s e-commerce business, he pointed out that Tommy Hilfiger profitably brings in about $85 million a year in the channel and that the business is growing at a rate of about 20 percent. PVH is now in a position to centralize management of Calvin Klein’s e-commerce activities and will be launching sites in Europe and Asia for the brand.
Previously, e-commerce for the name had generated about $20 million and “lost a couple of million dollars” on the bottom line under the old model, Chirico noted.
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia
Azzedine Alaïa's “I-did-it-my-way” ethos stood out starkly at a time when brands are experimenting with consumer-facing fashion shows, coed formats and trans-seasonal collections – anything to perk up lackluster sales of ready-to-wear in an age of Insta-everything. “It’s not creation anymore. This becomes a purely industrial approach,” the late designer told WWD in an interview last year. “But anyway, the rhythm of collections is so stupid. It’s unsustainable. There are too many collections.” Read more about the iconic designer’s life and work on wwd.com, link in bio. #wwdfashion #azzedinealaia (📷: @WWD Archive, 1986) #alaia
Sneaker reselling app @goat’s latest exhibit, "The Greatest: New York," tells the story of New York's sneaker culture. To celebrate the exhibit, an intimate crowd gathered on Thursday night at the pop-up gallery space, located at Platform in Culver City, to hear guest speaker and illustrator @esymai talk about her own rise in streetwear and women in the business. "For me I'm just someone who is creative. I like to create things," said Chang. #wwdfashion
Azzedine Alaïa, one of the most iconic couturiers of the modern era whose body-con designs defined Eighties fashion, has died in Paris. The diminutive Tunisian-born designer, known for his structured knitted dresses with fitted waists and impeccably cut, figure-hugging second skin silhouettes was deeply admired by his peers, and counted supermodel Naomi Campbell - his adoptive daughter - among his inner circle, one of a gang of glamazons including Farida Khelfa, Carla Bruni and Stephanie Seymour who became ambassadors of his style. (📷: Alexandre Guirkinger) #wwdblast