The chief executive officer said during a call with Wall Street analysts that the department store accounts for Calvin Klein and Tommy Hilfiger are “our most important channel of distribution,” and even though stores are closing and turnaround efforts are continuing at many, PVH is seeing positive trends in the sector.
“It seems to us, based on recent earnings reports, that a number of our major competitors are experiencing significant sales declines particularly with North America department stores,” Chirico said. “Contrary to that trend, both Tommy Hilfiger and Calvin Klein are growing with these accounts.”
In an effort to keep that growth going, Chirico said Calvin and Tommy will be taking up more square footage in department stores during the second half of the year.
Wall Street seemed unconcerned with plans to further rely on department stores for sales and sent shares of PVH up 6.8 percent to $126.92, the highest since January 2014.
Ike Boruchow of Wells Fargo said PVH “simply continues to shine as a rare bright spot” in retail.
Eric Beder of FBR Capital Markets echoed that sentiment and said he sees the company as “one of the best-positioned apparel plays in our universe.”
The fastest area of growth for PVH is digital, where Chirico said investments are continuous “in order to drive both our owned e-commerce sites, as well as our third-party partners’ businesses.”
The ceo alluded to PVH’s work on getting tech-driven companies more familiar with the idea that “[selling] apparel, especially fashion apparel, is not the same as selling dish soap.”
“That dynamic and that learning curve has a long way to go when you think about the tech players,” Chirico added.
But he admitted that retail overall in North America “continues to be challenging,” something expected to continue at least through this year, and comparable sales for Calvin and Tommy declined slightly.
Outside North America, things are quite different.
Consolidated net sales for PVH exceeded the company’s and Wall Street’s expectations, coming in at $1.96 billion for the second quarter ended July 31, a 6 percent increase over last year, while net income grew to $119.7 million, compared to $90.5 million.
This growth can be mostly attributed to major sales gains for Calvin and Tommy internationally, where comp sales rose by 20 percent and 6 percent, respectively.
The order books for both brands are also increasing. Going into spring 2018, PVH said orders for Calvin are projected to be up by 25 percent over last year, and orders for Tommy are projected to be up 10 percent.
“Asia is virgin territory,” Chirico said. “China has got tremendous growth prospects in the future.”
He also sees retail as more stable in Europe, compared to the U.S., a country that’s “clearly overstored…on every level.”
Chirico has said previously that PVH sees the potential for the Calvin business in Europe alone to hit $2 billion, getting it on par with the Tommy business there.
Although it’s still early on and Simons’ first collection is just hitting stores, the partnership is already viewed as a boon to the entire PVH business.
“I think the excitement is building,” Chirico said. “Clearly, there’s excitement throughout the retail community with our partners and department store accounts. We think it’s going to be a major halo effect for us.”
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