March 29, 2019: During an earnings call with analysts on Thursday, PVH CEO Manny Chirico said that the company is dropping its high-end Calvin Klein 205W39NYC men's line and is in talks with apparel company G-III, its North America women's wear brand partner (including for that Tommy Hilfiger business), about G-III also taking over its Calvin Klein women's jeans business. The goal is to have that deal completed during the second half of the year, he also said, per a Motley Fool transcript, adding that "it demonstrates a high degree of confidence in G-III's ability to drive the women's jeans business in the North American region."
Dive Brief:
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Apparel conglomerate PVH on Wednesday reported that fourth quarter revenue year over year fell 1% to $2.5 billion (and increased 2% on a constant currency basis), including a $125 million hit to results because 2017 had an additional (53rd) selling week. Net income in the quarter rose to $158.4 million from $107.9 million in the year-ago quarter, according to a company press release.
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By brand, Tommy Hilfiger revenue in the quarter rose 2% to $1.2 billion, with North America revenue rising 2% to $447 million, as comparable store sales rose 16%. Calvin Klein revenue fell 2% to $953 million, with international revenue rising 2% to $523 million and North America revenue falling 7% to $430 million, as North America comps on a shifted basis fell 1%. Revenue at the company's Heritage Brands business (which includes brands like Van Heusen ) in the quarter fell 5% to $363 million as store comps remained flat, and its pre-tax loss was $8 million due to the fall in revenue and gross margin pressure.
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For the full year, total revenue rose 8% to $9.7 billion thanks to a 12% increase at Tommy Hilfiger, which saw North America store comps rise 5%. Growth in Europe and Asia and strong North America wholesale propelled Calvin Klein to an 8% revenue increase, as international comps rose 5% and North America comps rose 1%, the company said.
Dive Insight:
Tommy Hilfiger is on the move for PVH, and the company boosted its outlook for this year on the brand's performance.
PVH expects revenue in 2019 to increase about 4%, with Tommy Hilfiger projected to increase some 6%, Calvin Klein projected to increase about 2% and the Heritage Brands business projected to increase about 3%.
UBS analysts hailed global apparel companies like PVH as having more potential this year than U.S.-based ones, according to a note emailed to Retail Dive. "We continue to believe PVH is undervalued," the UBS team wrote, noting that Calvin Klein is expected to fix last year's style misses by mid-year and that Tommy Hilfiger has even more potential.
Jane Hali & Associates analysts agree. "PVH overall is still heavily dependent on the North America wholesale and outlet channels," they wrote in comments to Retail Dive. "The CK Jeans relaunch was not fruitful and there were no changes for Q4. We expect to see an improved CK Jean product for Fall'19 delivery."
While both the company's major brands sell at flagship prices abroad, they're dependent on outlet sales in North America, Jane Hali also noted. "Online, the experience could improve for both brands. Calvin use[d] to have mobile and it seems to have been removed. Tommy does not have mobile."
That may need to change. Tommy Hilfiger this week abruptly shuttered its Fifth Avenue store in New York, and PVH said it will focus on digital sales.
The company's guidance assumes it will close on a few acquisitions in the works, including taking full ownership of its Australia business and taking over the Tommy Hilfiger retail business in Hong Kong and "certain other countries in Central and Southeast Asia" from its licensee in those markets. The company expects those pending acquisitions to add some $150 million of revenue in 2019.
