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Tommy Hilfiger and Calvin Klein owner PVH Corp said revenues rose 2 per cent in the first quarter of 2023 to $2.16 billion, on a China turnaround as North American sales lag. Shares fell 10.42 per cent on Thursday.
“We had a strong start to 2023, delivery performance ahead of expectations for both the top and bottom line, driven by our execution of the PVH+ plan,” CEO Stefan Larsson told investors on Thursday’s earnings call. “I know that we’re on the way to transform this company.”
PVH+ is centred around five pillars: winning with product; winning with customer engagement; winning in the digitally led marketplace; developing a demand- and data-driven operating model; and driving efficiencies and investing in growth — the goal being to build Calvin Klein and Tommy Hilfiger into “the most desirable lifestyle brands in the world,” Larsson said.
By brand, Tommy Hilfiger saw a 5 per cent increase year-on-year to revenue. Calvin Klein, on the other hand, remained flat, while Heritage brands (which now includes intimates brands Warners, Olga and True Co.) revenue decreased 12 per cent year-on-year. Across both brands, PVH is focusing on investment in hero products and connecting these consumer products with “culturally relevant aspirational talent,” Larsson said, offering Shawn Mendes and Tommy Hilfiger as examples. “These campaigns form a powerful brand halo and ignite our talent and influencer engine globally. We’re stepping up our investments here in a very targeted way.”
“We keep gaining this traction all across the company,” Larsson said. “Having done this a few times, I know when that inflection point happens when you start to see traction just building. But, at the same time, we are prudent, we are in it for the long-term value-creation for shareholders and we recognise that we’re in a choppy macro.”
China saw an uptick of 44 per cent in local currency, following the lifting of Covid restrictions. “Our [Chinese] consumers came back strong,” Larsson said, noting continued strength in Japan, Korea and Australia as well. Chief financial officer Zac Coughlin added that China was a “particular bright spot”.
This was bolstered by a host of China-focused investment efforts, according to Jane Hali Associates: investment in channels such as Douyin and collaborations with Tmall Innovation Centre, and enhanced investment in supply chain in the region. Larsson indicated plans to increase these strategic investments in the region, “particularly in China where both Calvin and Tommy are under-penetrated”.
Europe saw mid-single-digit growth, adjusting for the impact of Russia’s 2022 exit. North American revenues were mixed. Tommy Hilfiger revenues were up 11 per cent year-on-year, whereas Calvin Klein saw a 12 per cent decrease. PVH spent less time discussing the consumers’ slow-down in luxury spend than its competitors including Ralph Lauren (down 3 per cent) and Tapestry (up 3 per cent, lagging behind other regions). That said, Coughlin did acknowledge that “macroeconomic uncertainties still exist within the consumer sentiment tempered by inflammatory concerns,” noting that this informed its balance of “optimism and prudence” in PVH’s 2023 planning. Direct-to-consumer was a bright spot for the region, with double-digit growth across DTC stores and e-commerce. Wholesale was down “as planned”, especially for Calvin Klein, Coughlin said, citing retailers’ cautious approach given elevated inventory levels.
Looking forward, PVH projects revenues to increase between 3 and 4 per cent on 2022. In the closer term, second quarter revenues are expected to rise low single-digits on the year prior. It’s not raising its guidance for the year given the “choppy macro”. The plan is to continue to execute the PVH+ plan for growth. “What’s crystal clear to me is that no matter where in the world I go, there is incredible strength and untapped growth potential for both Calvin and Tommy,” Larsson said.
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