PVH Corp.’s Emanuel Chirico is confident this year will see sales continue to grow in North America and abroad, and perhaps even the addition of a third marquee brand to its stable.
The chief executive officer said Thursday during a call with analysts that the company is “spending time” and “trying to be aggressive” in looking for a third brand to join PVH-operated labels Calvin Klein and Tommy Hilfiger, but didn’t give many details on what is being considered.
“I think we’re not going to go very far afield from where we’ve been,” Chirico said. “I don’t think the market has to worry about us going into…categories that we don’t have expertise.”
Chirico has said previously that he wants a brand that would not “cannibalize” either the Klein or Hilfiger businesses, and doesn’t want one that is in desperate need of a savior but still has plenty of growth potential.
There are some brands floating around that could fit the bill, depending on which direction PVH wants to head. Tory Burch is suddenly in a situation with brand stakeholders that has the potential to turn into a sale; the long-independent Dries Van Noten is said to be looking for a financial partner, and Stella McCartney is buying out Kering’s stake in her brand, although the designer told WWD she’s not looking to take on a business partner right now. PVH could also go for something more under the radar, and possibly less costly, as it did last year when it acquired the online-only lingerie operator True & Co.
Speculation aside, Chirico said: “We’re looking, we’re aggressive and we would hope that some opportunity would come across that makes sense.”
The company is also looking at the possibility of buying back additional licenses, as it did last year with Hilfiger in China, possibly in Southeast Asia and Brazil.
For now, the company is pleased with North American sales that look to be turning around after a difficult period last year, while sales in Europe and China are exceeding plans. For fiscal 2017, PVH saw consolidated revenue for the year grow 9 percent to $8.9 billion, led by a 10 and 11 percent sales increase at Klein and Hilfiger, respectively. Although profits fell 2 percent to $537.8 million, due in part to a significant onetime increase in its tax rate related to tax reform, earnings per share for the year came in at $6.84, compared to $6.79 in fiscal 2016.
International comparable-store sales over the year increased 6 percent at Klein and 8 percent for Hilfiger, respectively, but North America is still lagging a bit. Calvin Klein’s comps fell 1 percent, while Tommy Hilfiger’s managed to increase 3 percent. Meanwhile, PVH’s heritage business remained flat on a 2 percent comp increase.
With some sales momentum, Chirico said North America is one of the company’s “big opportunities” for the year ahead, given the “general sense” of increasingly positive consumer sentiment and the increase in tourism PVH is seeing.
PVH expects earnings per share to come in at around $8.80 based on a projected 7 percent consolidated revenue increase. Revenues at Klein and Hilfiger are expected to increase 9 and 8 percent, respectively.
While consumer sentiment is said to be the highest since 2000, American households have more credit card debt than ever, at $1.01 trillion, the most since the height of the recession in late 2008 and early 2009, when it totaled $984 billion.
There’s also the looming possibility of new trade tariffs on imported goods from China, potentially including apparel, as part of President Trump’s purported effort to punish the country for its theft of American companies’ intellectual property and technology purportedly worth billions of dollars that could impact PVH’s business this year.
To Chirico, the idea of additional tariffs on the apparel industry is “just not logical.”
“It feels like, as a parent, if my son does something wrong, I’m punishing my daughter for his misdeeds,” the ceo said.
“Clearly there’s a problem with China,” Chirico said. “It’s not a level playing field and I personally think the administration needs to be aggressive and bring the Chinese to the table to have a reasonable negotiation.”
The ceo admitted that additional tariffs on apparel doesn’t seem to be “the way the wind is blowing in Washington,” but stressed that’s far from a guarantee.
As uncertainty in Washington, D.C., is the new normal, PVH is moving to expand its denim offering globally by fall for Klein and Hilfiger. Chirico said the business is “really benefiting from what seems to be a bit of 1990s fashion cycling back into the brands.” The Nineties has indeed been a major trend on the runways and in streetwear for several seasons, as nostalgia for previous decades continues to dominate pop culture.
After seeing strong sell-throughs on some new denim styles in Europe and Asia over the last few months, Chirico said fall will bring “an elevation of product” in North America, giving the company an opportunity to capture more of the Nineties trend.
This also folds into the company’s continued efforts to bring in younger shoppers with advertising for Hilfiger and Klein, featuring celebrities like Gigi Hadid and the Kardashian sisters and soon Lewis Hamilton, the young Formula One champion, as well as promotional events like it’s had with Amazon, a relatively new online partner selling mostly basic items.
As for whether the Amazon partnership will evolve into more of a fashion offering, Chirico said there’s a “slow evolution” happening with more shoppers growing more comfortable buying fashion online “and how, not only Amazon, but a lot of the pure plays, present fashion.”
“The maturity level at Amazon in particular when it comes to fashion needs to be further developed, it’s just not clear where it needs to be right now,” Chirico said. “I think clearly they’re on it and there is opportunity there, but they don’t have the metrics at this point and they don’t have the presentation and product at this point that it would take to really drive it.”
For More, See: