PVH is keeping it casual.
The parent company of the Calvin Klein and Tommy Hilfiger brands reported another $51.7 million in quarterly losses Wednesday evening, but said it still sees opportunity in casual products, especially online and abroad.
“Calvin [Klein], by the nature of its brand, has a huge, huge designer underwear and women’s intimate business. And a big jeans business that really plays into the casualization [trend],” Emanuel Chirico, chairman and chief executive officer of PVH, said on Thursday morning’s conference call with analysts. “And the Tommy [business] is probably as a brand, much more of a casual brand, much more of an athlete brand.
“We’ve been able to really focus on that casual nature,” Chirico continued. “Our assortment will be focused on relevant categories. And we are in a position to chase [those categories] until our better-than-expected demand materializes.”
That’s good news for any retailer in the era of the coronavirus, when many U.S. workers are expected to continue their work-from-home set-up for the rest of the year — some deep into 2021 — and schools continue to delay openings this fall.
But it’s welcomed, especially by PVH, which also includes heritage brands True & Co., Izod, Van Heusen and Warner’s, Olga, Geoffrey Beene and Arrow, many of which sell loungewear, activewear and other essentials for life at home.
While PVH’s total direct-to-consumer sales fell 24 percent last quarter (mostly a result of continued brick-and-mortar store closures during at least part of the three-month period), total digital channel revenues grew 50 percent and the company’s directly operated digital commerce businesses surged 87 percent during the same timeframe, year-over-year.
Chirico added on the call that revenues in both calvinklein.com and tommy.com grew triple digits in the most recent quarter year-over-year while adding many new customers.
“And our business with Amazon was also a highlight,” he said.
“We’re really spending where the consumer is shopping,” Chirico said. “Our marketing budget spend-by-type continues to show greater and greater digital marketing, away from some of these a lot of more traditional areas. We’re trying to get the flywheel [of marketing] more and more going away from product strength to showing up in the e-commerce channels, [because] that’s where the consumer wants to shop and engage with our brands.”
Mike Shaffer, executive vice president and chief operating and financial officer of PVH, added on the call, “Every time we take steps closer to what the consumer wants and needs, we see the positive performance proof points.”
But it’s not just consumers who have taken note. Despite the recent losses (nearly $52 million on top of $1.1 billion the quarter before that), shares of PVH were up nearly 5 percent during Thursday’s trading session.
“We’re giving credit where due given the better-than-expected results on PVH’s pivot away from more traditional domestic channels and strong liquidity update,” Kate Fitzsimons, an analyst at RBC Capital Markets, wrote in a note.
Wall Street also seems pleased with the growing international business. Quarter-to-date sales are up in both Asia and Europe, executives said on the call.
“China continues to gain momentum for both Calvin and Tommy,” Chirico said. “Europe has been our strongest market over the past couple of years. It continues to demonstrate a strong recovery,” said Chirico.
Even so, tailwinds persist, most notably in PVH’s wholesale division Stateside, much of which has been impacted by the recent string of bankruptcies.
“The fundamental issue in North America is the lack of control of the virus compared to the rest of the world. And I think that’s having an impact on consumer spending, particularly in apparel,” Chirico said. “In addition, as a company, a big part of our businesses is tourism driven by international tourists. And that is all but gone away for now. We’ve been anticipating that international tourists will not be back in the second half of 2020.”
He added that delays in the supply chain have the potential to further negatively impact the business. More reason why, even though shares of PVH “remain cheap,” as Simeon Siegel, managing director and senior retail analyst at BMO Capital Markets, wrote in a note, some investors “continue to fear the domestic CK business has extended past its brand peak.”
PVH is not providing guidance, but expects heavy promotional activity moving into holiday.
“This will clearly be a unique holiday season,” Chirico said. “Retailers are not buying extra inventory; they’re not ramping up. The key will be how much goods are out there that need to be cleared from a fashion perspective. We were planning to carry out as much as $200 million [worth of inventory into spring 2021] and that number has already been cut in half. So, I think it’s really good for us. Gross margin is a big opportunity. But given all the uncertainty in the business, we’re just trying to be cautious about how we think about margins going forward.”