In an unusually negative statement accompanying its third-quarter results, Emanuel Chirico, chairman and chief executive officer of New York-based PVH, which acquired the brand in 2002, said he was disappointed in the performance of some of Calvin Klein’s lines.
“While many of the product categories performed well, we are disappointed by the lack of return on our investments in our Calvin Klein 205W39NYC halo business and believe that some of Calvin Klein Jeans’ relaunched product was too elevated and did not sell through as well as we planned,” he said.
This could be interpreted as a direct swipe at designer Simons as he has oversight of the 205W39NYC collection and jeans, as well as a raft of other categories, global marketing and communications, visual creative services and store design.
The numbers were certainly far from rosy. Earnings before interest and taxes for the quarter decreased to $121 million, from $142 million a year earlier, “primarily attributable to an approximately $10 million increase in creative and marketing expenditures compared to the prior-year period.” It also cited gross margin pressure, principally due to more promotional selling in the Calvin Klein Jeans business, particularly in North America.
Revenue increased 2 percent to $963 million over the year. Within that, Calvin Klein International revenue rose 3 percent, while North America revenue edged up just 1 percent to $481 million, as growth in the wholesale business was partially offset by a 2 percent comparable-store sales decline.
This comes after WWD reported earlier this week that sources indicate Calvin Klein might be making a change in its photographers, hiring Glen Luchford to photograph the spring campaign, rather than Willy Vanderperre, who has worked closely with Simons since he took over the helm as chief creative officer in 2016.
The performance at Calvin Klein was in contrast to Tommy Hilfiger, which is also owned by PVH. It “truly outperformed” during the quarter, with revenue up 11 percent to $1.1 billion and PVH reporting strength across all regions, product lines and channels of distribution.
Nevertheless, “softness” in Calvin Klein led to PVH’s revenue falling short of Wall Street’s expectations for the first time in two years and sent its stock down more than 7 percent in after-hours trading.
Revenue came in at $2.52 billion in the quarter ending Nov. 4, up 7 percent over the prior year, but below the consensus among analysts for $2.53 billion, according to data from FactSet.
Net income increased to $243.1 million, or $3.15 per share, up from $239.2 million, or $3.05 per share, a year ago. Analysts had penciled in $3.14 per share. For the full year, PVH is expecting earnings to be in the range of $9.33 to $9.35 per share.