Manny Chirico continued to hand off the reins of PVH Corp. to Stefan Larsson on a conference call with Wall Street analysts Thursday, detailing third-quarter results but saying his goodbyes to the financial set after 15 years as chief executive officer.
Larsson, president since June last year, will step up to ceo in February, although Chirico will stay on as chairman.
Despite all the COVID-19 disruption — from massive store shutdowns to layoffs to corporate course corrections — Chirico is still exiting on something like a high note, overseeing an orderly transition and handing off a PVH that is positioned to gain with its two power brands, Tommy Hilfiger and Calvin Klein.
“I’m quite amazed at how PVH has grown and transformed during my 15-year career,” Chirico said. “We’ve evolved from a North America-based dress shirt business with sales of $1.5 billion to a portfolio of global iconic brands with about 70 percent of our [earnings before interest and taxes] coming from outside the U.S., more than 40,000 associates employed worldwide and close to $10 billion in revenues last year.
“I have great confidence in Stefan as he assumes the role of ceo,” Chirico said. “His global experience, consumer focus and high-performance track record, especially in this unprecedented time of disruption, are tremendous assets for PVH.”
The call had analysts thanking Chirico and wishing him well, but he dodged most of the business questions directed to him as Larsson stepped to the fore and started to give more of a feel for how he would handle the analyst dance as ceo. (It’s a two-step Larsson is well familiar with, having served as ceo of Ralph Lauren Corp.)
Larsson thanked Chirico and dove right in with the analysts, sketching out a vision along the way of a company that has plenty of room to grow through its two main brands and is going to continue to become more digital.
“My focus will be to build on the core strengths that brought us here and connecting them closer to where the consumer is going than any time before, which will form the foundation to successfully deliver our next chapter of growth,” Larsson said. “And coming in as the ceo, I will continue to build up on the people-first values Manny has instilled in PVH.
“With the critical start of the holiday season now under way, our teams have been doing a great job in pivoting to optimizing our consumer offering to this very different kind of environment,” he said. “We’re supercharging digital and our omnichannel capabilities. And leaning into our casual essential products led to our strongest digital holiday sales results and an above-planned performance for the initial holiday period overall.”
PVH’s third-quarter earnings tallied 98 cents a share, or $1.32 on an adjusted basis — well above the 24 cents analysts projected on average, but still below PVH’s EPS of $3.10 a year ago.
Revenues declined 18 percent to $2.1 billion following a 33 percent drop in the second quarter.
Like the rest of the industry, PVH’s business is changing, with digital sales set to be over 20 percent this year, up from 12 percent last year. The firm’s third-quarter sales through digital channels rose 36 percent, including a 70 percent bump at its owned e-commerce businesses.
Larsson said PVH’s digital capabilities are helping it stay agile during the pandemic.
“With approximately 40 percent of our stores temporarily closed in Europe during November, we quickly pivoted our operations to best leverage our digital distribution network,” he said. “And we’re also able to leverage our connected store inventory to meet the stronger-than-expected inventory demand online. In recent weeks, the lockdowns have started to ease, and we expect all doors to be opened within the next 10 days, assuming no further government restrictions.”
In the company’s home market, online sales have helped pick up some of the slack from the tourist market, which has imploded.
“While our overall sales in North America declined 38 percent [for the quarter], digital remained a true highlight with our own sites growing over 100 percent, enabled by our site enhancements, inventory investments and logistical improvements to fuel demand,” Larsson said. “We had another strong quarter with Amazon, including Calvin and Tommy posting their highest Prime Day sales ever achieved, with a significant increase in new consumers. At the same time, tourism is currently down 95 percent and not expected to return in a while, presenting a significant challenge for our brick-and-mortar business.”
Just how that brick-and-mortar business evolves is a project for the months and years ahead.
Asked about reevaluating the company’s store fleet, Larsson said: “We have been very successful in pivoting toward e-commerce. And then parallel to that, we’re working on rightsizing the brick-and-mortar fleet to match where the consumer is going. It’s an extreme case now given that we are in the middle of the pandemic. So we are tracking where we are going right now and optimizing what we can here and now. And then we are following where the consumer is going coming out of the new normal. But it’s going to be an important work for us to make sure that we rightsize the brick-and-mortar portfolio, North America, Asia, Europe.”
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