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.
My character, Dinah Madani, is just the coolest, [most] badass woman imaginable," says @amberroserevah. The actress stars in @marvel's newest series on @netflix, @thepunisher. To prepare for her role, Revah sat down with Homeland agents to get a real sense of with Dinah's day-to-day life is really like. Read our full interview on WWD.com. #wwdeye (📷: @jilliansollazzo)
A scene from the 91st annual @macys Thanksgiving Day Parade. The parade, which boasts 50 million TV viewers and 3.5 million on-site spectators, is considered one of the largest and most watched parades in the world. (📷: Jason Szenes/EPA-REX)
The circus came to @bloomingdales 59th Street on Tuesday night and lit up Lexington Avenue with acrobatic dancers, death-defying knife throwing, sword swallowing and aerial acts with no net. The 45 minutes of theatrics built up to unveiling the holiday windows depicting @swarovski crystal-encrusted circus pieces and scenes from “The Greatest Showman” – songs from the soundtrack included. See the rest of the photos on WWD.com #wwdfashion (📷: Joshua Scott)
The psychedelic fashion that pervaded the ’60s is back with an exhibit at the @museumofcityny. “Mode New York: Fashion Takes a Trip” chronicles the changing styles from 1960 through 1973 and features designers such as @ysl, @oscardelarenta and more. The exhibition, which is on display through April 1, is organized into four periods: First Lady Fasion, Youthquake, New Bohemia and New Nonchalance. Pictured here is model Pat Bardonella during the Garvey Day Parade in 1968. (📷: @kwamebphoto) #wwdeye #wwdfashion
“People should be a lot more honest in expressing both the dark and light of themselves. We need to give each other the space to do that because it’s the only way we can grow and evolve,” says @noelwells of her new film “Mr. Roosevelt,” which is largely based on her own struggles. Unexpectedly leaving @nbcsnl in 2014 after just one season, Wells felt set back in her self-esteem and career trajectory. She quickly refocused her energy to more personal projects, which led to the completion of “Mr. Roosevelt.” Read the rest of WWD’s interview with the “Master of None” actress on WWD.com #wwdeye (📷: @jilliansollazzo)
@barbrastreisand is giving fans a chance to see her perform up close in a new concert series, which makes its debut on @Netflix today. From behind-the-scenes takes to her concert performance in Miami last December, the two-hour streaming special captures Streisand in her element. Pictured here is the singer/actress photographed for WWD in 1963. (📷: Palmieri Tony) #wwdeye #wwdarchive
@chanel and @pharrell dropped what’s being dubbed as the world’s most exclusive sneakers yesterday. The Adidas Originals NMD Hu, which Williams designed in collaboration with Chanel and @adidasoriginals, has a waiting list of over 120K people who pre-registered online at chanelatcolette.fr –– and only 500 pairs are on sale. The singer predicted the resale value of the shoes could reach $40K. Read the full interview on WWD.com. Link in bio. #wwdfashion (📷: Dominique Maître)
@imanshumpert is diving deeper into his creative endeavors and relaunching his clothing line, Post 90s, and is helping to raise money for the hurricane victims in St. Maarten with a jersey he’s designed with his brother. The Cleveland Cavaliers player talked to WWD about kneeling during the national anthem, working with fashion brands and how he wants to be more than an @nba player. Read the interview on WWD.com #wwdfashion (📷: George Chinese)