PVH Corp. is decentralizing the design functions of Calvin Klein Jeans and cleaning up its distribution as the company seeks to return the division to acceptable levels of profitability in the U.S. and Europe.
In separate comments Thursday at the Piper Jaffray Annual Consumer Conference in New York and on a call to discuss first-quarter results reported late Wednesday, Emanuel Chirico, chairman and chief executive officer of PVH, noted that jeanswear was “the only difficult business” within the Calvin Klein brand.
On the call, he said Calvin Klein Underwear, acquired along with the Klein jeans business as part of its purchase of Warnaco Group Inc. for $2.9 billion in February, is “profitable” and “working well.”
While the Calvin Klein business overall exceeded sales and profit expectations in the first quarter, the jeans business under the designer brand has been unprofitable in North America and Europe, with sales continuing to trend downward. “We are not looking for any significant improvement in the trends of that business through…fiscal 2013,” he told analysts on the call.
While PVH takes a long look at Calvin Klein Jeans’ distribution in the U.S., which the group considers weighted too heavily toward off-price stores, it’s planning to downsize the retail footprint in Europe over the next 18 months by closing 25 to 35 Calvin Klein Jeans stores in Europe. Prior to its acquisition by PVH, Warnaco operated 100 stores under the Calvin Klein Jeans banner, 55 of which were classified as full-price and the remaining 45 as off-price.
Expanding on the jeanswear situation during his comments at the Piper conference, Chirico said the jeans businesses are currently operating “500 to 600 basis points” below the operating margins to be expected. “So in Europe it’s a business that’s losing money and in North America it’s profitable, but at lower rates,” he said.
He said that changes made since the Warnaco acquisition have been well received by PVH’s retail accounts but won’t have a substantial impact on the jeans unit’s performance this year. “The sales distribution mix is out of balance,” he said. “There is too much in the off-price channel or in the club channel compared to the regular-price channel with jeans only. On balance, the Calvin Klein brand is very well distributed to department stores throughout the world, but in the jeans category, we’re overpenetrated in the off-price channel and we need to bring that into balance over time.”
As that balance is sought, PVH will establish regional design hubs to tailor jeanswear products to local markets. “We’re just trying to bring the Warnaco jeans — the Calvin Klein Jeans business — into a model that’s consistent with the way we’ve operated” in other elements of PVH’s owned and licensed Calvin Klein businesses, he said.
PVH shares surged Thursday, rising $11.32, or 10.2 percent, to close at $122.60 after it comfortably beat first-quarter earnings expectations. Its net loss for the three months ended May 5 was $20.1 million, or 25 cents a share. Excluding acquisition- and integration-related costs, adjusted earnings per share were $1.91, 56 cents above analysts’ expectations. Revenues rose 33.8 percent, to $1.91 billion, and were essentially flat when contributions from the Warnaco acquisition were excluded.
Also at Piper Jaffray, Michael Koppel, executive vice president and chief financial officer of Nordstrom Inc., said the company had used its Fashion Rewards loyalty program, tied to its private label debit or credit card and a co-branded Visa card, to build its customer base.
The firm lowered the spending levels needed to qualify for certain benefits and last year gave Fashion Rewards members early access to the stores’ legendary anniversary sales, which resulted in the opening of over one million new accounts.
The company also began providing Fashion Rewards membership to customers of its Rack operation last year, something it hadn’t done previously.
“Rack has been such a great growth vehicle for us, and it also is a channel that tends to attract a younger customer,” Koppel said.
The company is currently testing a loyalty program in the cosmetics area, the cfo added.
EXCLUSIVE: @tomford is opening its first-ever beauty store. The boutique, which opens November 20 in London’s Covent Gardens, was designed with the over the top glam Ford is known for. Read the full story on WWD.com, link in bio. #wwdbeauty #wwdnews (📷: Simon Wagner) #TomFordBeauty
New York-based DJ @harleyvnewton threw a party to celebrate the holiday collection of her dress and pajama line @hvn at the Ladurée Beverly Hills. It Girls @katebosworth, @rashidajones and more joined in on the fun, which included cocktails, croque monsieur sandwiches and a photo booth. #wwdfashion (📷: Owen Kolasinski/BFA.com)
For the holidays, @Burberry partnered with 20-year-old artist @blondeymccoy on a series of three outdoor murals in downtown Manhattan. The murals are McCoy’s interpretation of a Christmas eve party, the idea of charity and the spirit of family. His third mural, pictured here, is the most personal. The image depicts McCoy’s grandparents and father in London’s Trafalgar Square in the Seventies. “My work often features lots of sentimental objects.” #wwdeye
For spring 2018, designers applied bold colors and cartoonish motifs on everything from sneakers and belts to key chains. See all the top men’s accessories trends on WWD.com. #wwdtrends (📷: George Chinsee; Prop Styling by @rnasti; Market Editor: @luiscampuzano)
The @dior-sponsored @guggenheim international gala pre-party has a history of drawing cool-girl musical acts to serenade the crowd –– and last night was no exception. @haimtheband performed songs both new and old, and lured a star-studded audience with the likes of Rebecca Hall, Kate Mara, Mamoudou Athie and more. #wwdeye (📷: @lexieblacklock)
In a partnership between the @metopera and the @englishnationalopera, “Marnie” was born. The opera, with costumes sponsored by @mrporterlive, is an adaptation of the 1961 thriller by Winston Graham. Arianne Phillips, who created the costumes, is no rookie: She’s styled Madonna for her tours and created costumes for a myriad of films in the past. Read WWD’s interview with Phillips, where she talks about her inspiration for the opera’s costumes on WWD.com #wwdfashion
@barneysnyc took a different approach to their holiday windows this year. Instead of Christmas decor, Barneys tapped @thehaasbrothers to tell a story of positivity, gratitude and inclusivity via heartwarming silliness and humor. “It’s about kids and it’s about coming together and being family and loving each other,” said Simon Haas. #wwdfashion (📷: @joshuascottphoto)
Beauty influencer @kandeejohnson makes her foray into hair care with a collaboration with @ogx_beauty — making it the first time that OGX has teamed up for a product creation. The collab includes shampoos and conditioners in three scents. At 39 and a mom, Johnson is a different profile than the emerging social media stars, but is considered one of the pioneers of the digital beauty influencer world. Read WWD’s interview with her on wwd.com, including the strangest beauty product she’s ever tried #wwdbeauty