The long list of companies that have had to furlough their workers grew a little longer Tuesday when PVH Corp. could hold out no longer.
The corporate parent to Tommy Hilfger and Calvin Klein has been paying its workers in the U.S., Canada and Europe for 30 days even though stores have had to close to slow the spread of COVID-19.
But the company — like many others, including competitors Capri Holdings Ltd. and Ralph Lauren Corp. — is now having to take more drastic measures to conserve cash and weather the storm.
Seventy-five percent of the firm’s North American employees are going to be furloughed or see their hours curtailed. (All told, the company has about 35,000 workers, including 12,000 in Europe and 5,000 in Asia).
Call that something of a baptism by fire for Stefan Larsson, who’s been president of the company since May and is heir apparent to chairman and chief executive officer Emanuel Chirico.
Larsson has been heading the task force at PVH looking into the group’s options around the globe. It’s been a delicate and difficult operation that also includes Chirico; Dave Kozel, chief human resources officer, and Mike Shaffer, chief operating and financial officer.
The group is speaking multiple times daily.
“We just make sure we are clear on what we are up against and how that is changing and that we take the necessary actions now that will enable us to come out strong in the end,” Larsson told WWD in an exclusive interview. “It’s both a human crisis and a business crisis at the same time.
“No one has all the answers in a crisis like this,” he added. “As leaders, we have to lead through this with humility and being radically transparent and at the same time compassionate in how we lead through this.”
The toughest decisions “by far” landed on Tuesday with the furloughs, which come at a time when 10 million people rushed onto the U.S. unemployment rolls in just two weeks last month.
“Even though we are one of the financially strongest companies coming into this crisis, we are not built to stand still,” Larsson said. “We tried to keep our full teams on as long as we possibly could.”
There’s a fine line to walk.
“How do we protect our people in the short term to the maximum possible extent and yet make sure that we get through this crisis and come out stronger so we can protect them in the long term?” Larsson said.
While this is a time of great change in fashion, PVH is looking to bring everybody back.
“Our intention is that this is all temporary through this crisis and then coming out of this, we look forward to the day when we can bring our teams safely back,” Larsson said. “And the decisions we make today are made to make us get through this time and then be able to bring the team back.”
Clearly Larsson, while still new to the job, is now fully part of PVH, seeing the corporate culture up close and in a time of stress.
“Some companies speak about values and then do something different, but in a crisis, you cannot hide, everything is magnified,” Larsson said. “The biggest takeaway for me is that the culture of caring about people and culture equally is really a value and it got magnified over the past few weeks and it makes me really grateful to be part of the team.”
Larsson said he and Chirico speak throughout the day and on their last call each day, they talk about the people of PVH and “what we do to minimize the impact on our team. That’s where we end up when we have our final call of the day.”
In addition to the furloughs, executives are taking pay cuts and PVH is cutting back or eliminating all discretionary spending, including marketing, and is cutting capital expenditures to about $190 million from $345 million last year. It is also closely managing inventories, focusing on cutting working capital, redeploying inventory and consolidating future seasonal collections.
PVH drew $750 million from its better than $1 billion revolving credit facility to beef up its cash position, suspended its stock repurchase program and cash dividend. The sale of the Speedo North America business to Pentland Group was also closed, raising $170 million in cash.
With all of that as some extra financial cushion, Larsson said the company was also driving business recovery efforts, refocusing more on e-commerce and collaborating with key partners, such as Amazon or Tmall in China.
“When we get out of this, it’s going to be…a new normal, a new world,” Larsson said, although he said just what that looks like remains to be seen.
Kozel, who’s been head of human resources at PVH for more than 16 years, did venture a guess about how the COVID-19 crisis would echo out into the future.
“It’s going to change the way people work,” Kozel said. “Today, we’re running a global company out of our [home] offices or living rooms.”
That reality will change the way companies are structured, he said.
While much of the workforce is having to sit out without pay, cuts are also coming to the very top of the corporate org chart.
Chirico sent a “A Note From Manny” message to the global workforce Tuesday saying: “I will not be receiving a salary and our senior leadership will reduce their salaries by 20 percent to 50 percent during this crisis period. In addition, our board members will forgo 100 percent of their cash compensation for the duration of the crisis.”
The ceo is a PVH veteran and has seen his share of crises, but COVID-19 is something new.
“It is having a more extreme and sudden impact on our business than 9/11 and the great financial recession of 2008 combined,” the ceo said, acknowledging people in the “PVH family who are dealing with COVID-19 as a patient, a parent, family member or friend.”
As a global player, PVH is putting together a patchwork approach with its response tailored to each market, taking into account what stage the COVID-19 outbreaks in various countries, as well as local regulations and the various rescue plans set into motion by governments.
• North America: In PVH’s home market, where it has the highest concentration of workers, three-quarters of its store, office and warehouse associates are being furloughed or having their working hours decreased. Medical benefits will continue for furloughed workers. The company’s warehouses and distribution centers are open, but working at a reduced capacity and workers have been given an additional 10 days of paid time off.
• Asia: Offices and stores closed for the Lunar New Year in January and stayed closed until government and health officials gave the green light. Most stores are reopening, but with limited hours and have seen decreased sales and foot traffic. As a result, corporate associates are subject to temporary salary reductions.
• Europe: The company is tailoring its approach to each country based on the various subsidies and relief packages. Most stores are closed and corporate associates are working from home.
• Brazil: Stores are closed and PVH is looking into governmental pay subsidies, working hour reductions and salary reductions.
• Australia: Stores and offices are closed in a government-mandated stand down and almost all associates are furloughed, with some senior executives working from home and voluntarily foregoing pay.
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