Calvin Klein Fall 2016 Global Ad Campaign

Emanuel Chirico, chairman and chief executive officer of PVH Corp., said in a conference call to Wall Street analysts that the group’s Calvin Klein Europe business has the potential to do $1 billion in volume in the next three years.

The conference call was held the day after the company posted third-quarter results. On Wednesday PVH posted a decline in third-quarter profits, attributable mostly to tourist traffic. Net profits for the period ended Oct. 30 fell 43.2 percent to $126.1 million, or $1.56 a diluted share, on net revenues that rose 3.7 percent to $2.24 billion.

During the call, Chirico said the momentum of its Calvin Klein and Tommy Hilfiger international businesses continued during the quarter. “Our Europe and China businesses continue to be our healthiest markets, along with our North America wholesale business. The strength has been across all channels of distribution: Wholesale, retail and our digital channels,” he said.

Chirico said the one challenge continues to be in the U.S. retail businesses, adding that the company “did not see an improvement in comp store sales trends from the first half trends.”

The ceo explained that international tourist traffic and spending continue to weigh on the U.S. retail businesses, although in the last two weeks of November there had been “significant improvement in comp store sales across all of our U.S. retail businesses.”

Chirico said of Hilfiger that the “reaction in brand awareness that [Gigi Hadid] has helped to bring to our brand over the last few months has been terrific.” Hadid is the global ambassador for the Hilfiger brand in women’s apparel, footwear, accessories and fragrance.

Chirico said the initiative with Hadid reflects the brand’s strategic commitment to expand its women’s businesses globally. He said overall revenues for the Tommy brand rose 6 percent on a constant currency basis, while the Tommy Europe business performance “continues to highlight the strength of the brand in our largest region and highlights the market share gains the brand continues to achieve.”

Over at Calvin Klein, Chirico said that revenues rose 10 percent on a constant currency basis, driven by top line growth in Europe, China and North America wholesale across all classifications. He spoke about strength in the European businesses coming from all major markets and across all product categories, as well as noting acceleration in both the jeans and underwear categories for the brand. He also said there was good growth in some new product categories, such as accessories.

In Calvin Klein Asia, strength was seen in jeans, underwear, accessories and in ath-leisure. North American wholesale saw strength across categories from dress shirts to sportswear, jeans and “certain underwear business led by continued momentum in our women’s intimates business.”

Chirico said the company’s Heritage business saw revenues down 8 percent, attributable to the ongoing impact of “our rationalization initiatives announced in 2015, including the exit of the Izod retail business and the discontinuation of several licensed products within dress furnishings.”

Chirico thought the company’s “growth internationally will continue to be very strong.” He noted that the company sees a big growth opportunity selling replenishment of core products on Amazon.

As for the comparison between Calvin in Europe, which has revenues of between $550 million and $600 million in volume, and Tommy, which is about $1.7 billion in sales, Chirico said “there’s the opportunity long term to match Tommy or pretty close to it.” He noted that Europe is the only region where Tommy is larger than Calvin, and that in the “next three years, we don’t see any problem getting to $1 billion in sales in the European market” with Calvin, adding that men’s sportswear is a huge opportunity.

He also noted that the women’s opportunity, given the brand’s DNA, is “significantly larger for us in Europe as we go forward.” Chirico said that the addition of Raf Simons – whom he called an “amazing women’s designer” – is “going to have a significant influence on Calvin overall.”

Separately, PVH and Grupo Axo on Thursday said they have closed on their agreement to form a joint venture that licenses from wholly-owned subsidiaries of PVH the rights to operate and manage the distribution of several PVH brand products in Mexico.

Those brands include Calvin Klein, Tommy Hilfiger, Warner’s, Olga and Speedo. The joint venture was formed through the merger of PVH México, S.A. de C.V. with Baseco, S.A. de C.V. The newly formed joint venture also has the license to operate Tommy Hilfiger footwear.

Shares of PVH on Thursday closed up 1.9 percent to $107.93 in Big Board trading.