NEW YORK — PVH Corp. believes it can move the Calvin Klein Jeans business back to profitability next year despite continuing softness in southern Europe.
During a conference call Tuesday morning to discuss second-quarter financial results, Emanuel Chirico, chairman and chief executive officer of the apparel giant, sidestepped an analyst’s questions about other plans for Calvin Klein apparel in Europe momentarily to discuss the critical importance of righting the jeans business acquired as part of the purchase of Warnaco Group for $2.9 billion earlier this year.
“It’s critical for us, first and foremost, to really to try to get our arms around the jeans business, have that repositioned, get some traction in that business, improve the distribution of that business in Europe and take a business that’s actually losing money and start to bring it to a breakeven, to a small profit in 2014 and then move it forward,” he said.
The task won’t be easy. Earlier he said Calvin Klein jeans in North America and Europe “continues to be the only difficult business in the Calvin Klein portfolio. We have planned those businesses down mid-single digits and are anticipating continued pressure on margins in order to move through goods for the third and fourth quarter of this year.”
He pointed out that the two Calvin Klein jeans and underwear businesses in Europe, both previously operated by Warnaco, account for $500 million in annual sales and currently generate an operating margin of about 3 percent, a figure the company wants to more than triple.
“I know that everyone is going to comment that Tommy [Hilfiger’s operating margin in Europe] is at 14 percent, but I think 10 percent at this moment in time for the next three years would be a great goal for us, to improve the 3 percent to 10 percent. And I think that clearly is the opportunity ahead.”
The effort has been further inhibited by the difficult macroeconomic conditions in southern Europe, which accounts for between 75 and 80 percent of the jeans unit’s business on the continent. Complicating top-line expectations are PVH’s efforts to clean up distribution and steer it away from the off-price channel in Europe. Commenting on prospects for spring 2014, Chirico noted that open-to-buy among many Italian accounts is down more than 20 percent, and PVH has been cautious about selling to many specialty stores “where we have significant credit collection issues.”
Meanwhile, the Calvin Klein business overall during the second quarter was strongest in South America, with 10 percent sales growth in Brazil highlighted by the strength of the brand’s jeans.
“In North America, our business continues to perform strongly across all categories, with the exception of men’s and women’s jeans,” the ceo said. “We have seen very strong performance in our wholesale men’s sportswear and our men’s and women’s underwear business. In addition, our North American retail business posted a 6 percent [comparable-store] sales increase and higher margins due to better sell-throughs at higher average unit retails.”
Furthermore, the integration of Warnaco’s operations is “on track” for completion in 2015. “And that’s the same timeline where we started the fiscal year,” Chirico said.
PVH shares pulled back $7.49, or 5.7 percent, to $124.62 in trading Tuesday as investors were disappointed with the company’s conservative guidance for the third quarter and its failure to raise full-year guidance despite beating second-quarter analysts’ estimates.
Late Monday, the company reported a net loss of $16 million as revenues grew 47 percent to $1.96 billion, with the top line raised and the bottom line lowered by the addition of the Warnaco businesses. On an adjusted basis, earnings per share were $1.39, above Wall Street and company estimates.
@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)
Not only does #TheProfit return to CNBC tonight, but @marcuslemonis has launched @shopmarcus, a new shopping and lifestyle retail experience in Aspen and Chicago, with more locations to come. The retail stores offer in-store stylists and a variety of contemporary womenswear selections.
“It’s life, I’m going to face it,” @mingxi11 sighed. “I fell, but you know, I think the most important thing is that I get back up. I had the love, the help from my sister — the girl next to me Gizele [Oliveira] — she’s so nice. When I went backstage everybody was trying to comfort me like ‘Oh Ming, it’s OK.’ I’m really, really touched. I think it’s them who gave me the courage to go back on stage for the finale,” Xi told WWD of her fall at the @victoriassecret fashion show. (📷: David Fisher) #wwdfashion #vsfashionshow #victoriassecret
@louisvuitton tapped @therealpeterlindbergh for its latest city-centric photo book, which is part of a series called Fashion Eye. The primarily black and white book captures the spirit of Berlin in 57 images shot between 1989 and 2019. “Berlin is an inspiration for me, more than a city. I mean @millajovovich is simply Berlin!” said Lindbergh. #wwdfashion
“You know, I think audiences expect a certain performance so I have to deliver to them what they’re expecting to a certain degree. But I’m also a different actor and a different person, I have my own spin on the character,” says @noahegalvin of his takeover of the leading role in “Dear Evan Hansen” following the departure of @bensplatt, who originated the role. Read WWD’s interview with the 23-year-old actor on WWD.com #wwdeye (📷: @jilliansollazzo)
For pre-fall 2018, @etro created richly-colored wonderland, using tapestries, textiles and wallpapers from the Eastern world at large. The line featured floral and graphic prints and jacquard motifs, like this two-piece look featured here. #wwdfashion (📷: Giovanna Pavesi)
@kith is moving into children’s. The men’s and women’s streetwear brand has launched Kidset, a Kith kids line located in New York at 64 Bleecker Street. The line includes mini versions of staple Kith pieces like the Astor bomber jacket and the Kith box logo sweatshirts, along with a wall that can display up to 120 pairs of shoes from @adidas, @newbalance, @timberland and more. #wwdfashion
“I just wanted to create this fully rounded character, but I do think what excited me most was just the opportunity to give a group of people representation that I feel needs it. I like to do characters in projects that stand for something and Karolina definitely does, so that was really exciting to me,” @ginnygardner says of her new role in @hulu’s “The Runaways.” Gardner plays Karolina Dean, a queer superhero, which is a rarity for @marvel. Read more about Gardner’s character on WWD.com #wwdeye (📷: @dandoperalski)