The retailer — parent company to the Calvin Klein and Tommy Hilfiger brands, in addition to smaller brands True & Co., Izod, Van Heusen and Warner’s, Olga, Geoffrey Beene and Arrow — reported quarterly earnings Wednesday after the market closed, falling short on both the top and bottom lines, but beating Wall Street’s expectations.
“I never thought in my career I’d be talking about what a great quarter we had with revenues being down 33 percent,” Emanuel Chirico, chairman and chief executive officer of PVH, told WWD. “But I think it’s all relative, compared to where we had expected the business to be and where the market had expected the business to be.”
Shares of PVH, which closed up 3.33 percent to $59.57 each on Wednesday, continued to move even higher in after-hours trading. The stock is down nearly 20 percent year-over-year.
For the three-month period ending Aug. 2, total company revenue decreased 33 percent to $1.5 billion, down from $2.2 billion the same time last year. More specifically, total direct-to-consumer revenues, including company-owned stores, declined 24 percent during the quarter, year-over-year. But total e-commerce sales surged 50 percent, while online sales through PVH’s directly operated digital businesses were up 87 percent during the quarter year-over-year.
Total company revenues in the wholesale business declined 40 percent year-over-year.
“It is having an impact on our heritage brands’ businesses in North America,” Chirico said. “[The department stores’] buying of inventory has really shrunk during this period of time.”
But the ceo added that Tommy Hilfiger and Calvin Klein — PVH’s two biggest brands, which account for 85 percent of sales — do not sell at the midtier stores that have recently announced bankruptcies, including Lord & Taylor, J.C. Penney Co. Inc. and Stein Mart.
By brand, total revenues at Tommy Hilfiger and Calvin Klein fell 24 and 32 percent, respectively. Meanwhile, total revenues in the combined heritage brands fell 51 percent during the quarter, year-over-year.
The company lost $51.7 million during the quarter as a result, compared with profits of $193 million last year.
But Chirico said early signs of recovery in Asia and Europe are encouraging, as is PVH’s growing digital businesses.
“We feel good about how we’re recovering, despite being down 30-plus percent,” he said. “Pre-COVID-19 that [digital] trend was under way. The U.S. was overstored on any kind of metric. I think what the pandemic has done is just accelerated that process. I would have thought it would have been somewhat more gradual, but I think the pandemic has just accelerated all that. What I would have considered to be a five- to six-year trend is going to happen over the next one to two years. Digital is going to become a bigger part of the business.
“When things get back to normal, I think we’ll see brick-and-mortar bounce back to a degree,” Chirico continued. “But I don’t think you’re going to see these trends [completely] pull back. E-commerce will continue to grow at a significantly faster pace than brick-and-mortar. And, we’re going to see more and more store closures. It’s just inevitable, particularly in North America.”
Meanwhile, the company had a few other bright spots, such as the Calvin Klein’s women’s intimates and men’s underwear businesses.
“That business has been extraordinarily strong,” Chirico said. “The whole casual area [is doing well], which I think both Calvin and Tommy have a strong position in, casual, the jeans area, along with the sportswear category has really been a big piece. Our T-shirt business is off the charts.”
In addition, digital intimates brand True & Co. and intimates brand Warner’s — by way of big-box retailers, such as Walmart Inc. and Target Corp. — also performed well during the quarter.
Even so, PVH’s North America business continues to be pressured with the resurgence of coronavirus cases Stateside. The North American business represented about 50 percent of total revenues in 2019, while Europe was about 37 percent and Asia about 14 percent.
“We’re continuing to see improvements and the toughest market continues to be the United States,” Chirico said.
To help cut costs, Chirico said PVH is moving forward with its plans to close all heritage brand stores by mid-2021. In addition, as announced earlier this summer, the company is reducing its workforce by about 450 positions, or 12 percent, across the entire portfolio. PVH has roughly 40,000 associates globally.
The ceo said the company is “optimistic on holiday, but we’re planning it very conservatively. There are questions that you have to ask yourself about how holiday is going to transpire: Is the consumer going to be comfortable shopping in malls? Will they do more shopping online? I think we’re well positioned to capture more of that. And, will it be an earlier holiday season as it kicks off?”
PVH ended the quarter with roughly $2.7 billion in liquidity, consisting of about $1.4 billion of cash on hand and $1.3 billion borrowing under revolving credit facilities as of quarter end.