Stefan Larsson stabilized PVH Corp. during the pandemic, leaned in on the powerhouse Tommy Hilfiger and Calvin Klein brands, promoted digital selling and built back earnings growth — now he is almost ready to lay out his multiyear vision for the future.
Larsson, who leads PVH as chief executive officer, told WWD that the company would hold its first investor day in more than a decade in April to chart a course into the future.
While the details of the plan will have to wait, the general direction PVH is headed in has become more apparent as Larsson transitioned from president and heir apparent to Manny Chirico in 2019 to handling the day-to-day amid COVID-19 to taking the reins this year.
The CEO sees great stores of strength in Tommy Hilfiger and Calvin Klein and much more potential to drive digital growth, which now makes up about 25 percent of sales — twice as much as before the pandemic.
Larsson pointed to third-quarter results, released after the market closed on Wednesday, and a stronger outlook for the year as proof that PVH is on the move.
“We had another very strong quarter of high-quality growth,” he said. “Despite the COVID-19 disruptions we know of today, we are taking up the earnings guidance for the year and we are now expecting higher than pre-pandemic [earnings before interest and taxes] rates for the year, with significantly higher gross margin rates and strong operating cost efficiency.”
PVH’s third-quarter net income increased fourfold to $279.7 million, or $3.89 a share, compared with earnings of $69.8 million, or 98 cents, a year earlier.
Adjusted earnings per share hit $2.67, coming in well ahead of the $1.95 to $2 PVH projected.
Revenues for the three months ended Oct. 31 rose 10 percent to $2.3 billion. Tommy Hilfiger’s revenues advanced 11.7 percent to $1.2 billion, while the Calvin Klein business shot up 21.7 percent to $961.1 million.
The Heritage Brands business, which was sold, logged a sales decline to $152.7 million from $238.3 million as PVH exited the retail portion of that business.
Larsson said the sale of the division helped focus management on the larger brands and better develop those businesses.
In all, the company sent bullish signals for the full year, projecting revenue growth of 27 to 28 percent with adjusted EPS of $9.25, up from the $8.50 previously forecast.
Like other big fashion houses, PVH benefited from generally strong consumer spending, a rush that has exacerbated the supply chain crunch that developed during the pandemic.
PVH said the disruptions to its logistics network worsened in October with port delays and pushed some U.S. wholesale shipments back into the fourth quarter. The company also noted that gross margins, which were boosted by full-price sales, were hit by increased costs to fly goods in.
While there is only so much large companies seem to be able to do to avoid the troubles at the ports, Larsson said PVH is getting better at operating the front end of the business during the age of COVID-19.
“We had a good start to the holiday through Black Friday and the Thanksgiving weekend,” he said. “We have learned how to navigate the ongoing and ever-changing COVID-19 disruptions.”
Larsson said that, when there is a resurgence of COVID-19, the company sees foot traffic at it stores fall, but that those who do come into the stores shop more, increasing conversion. Consumers then also pivot to the web.
With a global business, PVH has been through and studied that cycle in a number of markets.
“We have a competitive strength with how quickly we move with the consumer when a resurgence happens,” Larsson said.
PVH was among the companies revamping operations during the pandemic, cutting costs and focusing more on digital.
Larsson said the company has the advantage of two big, well-known brands in Tommy Hilfiger and Calvin Klein. (And while some dealmaking is always a possibility, he seems content to drive growth with those two names for now before expanding the portfolio).
“The consumer is strong and they respond to brands that they perceive are relevant,” Larsson said. “When we connect our iconic brands to culture through creators and people who shape culture, that’s when we see the brand heat really drive.”
He pointed to Tommy Hilfiger’s collaboration with Timberland, which sold out in two weeks in Europe and delivered more than 200 million consumer impressions in North America, and Heron Preston’s second collection with Calvin Klein focusing on essential wardrobe items like jeans and sweats.
It’s a balancing act that has the company drawing from both brands’ long-standing reputations and expanding from that base, bringing in new, younger customers with newness.
“It’s about staying true to our DNA and continually tapping into outside collaborators,” said Larsson, adding that big iconic brands can “serve as platforms of creativity and break down the walls of inside and outside and become more open.”
And a fuller take on just what that all means for PVH is coming in April.
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