The PVH Corp. picture is still coming into focus.
Stefan Larsson, chief executive officer, told WWD that the pieces of his PVH+ strategic plan continue to click into place.
The brands are driving interest, with Tommy Hilfiger garnering lots of attention with its runway show and Calvin Klein connecting with its Jeremy Allen White ad campaign. And the company is being reorganized to capitalize on that brand heat, serving up hero products and adjacent goods in a way that is meant to both be repeatable and require less inventory.
But it’s a transition that Larsson is having to push through a dicey time for retail, although holiday is on track.
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“It is a tough consumer backdrop in North America and Asia,” he said. “What we saw is that it was an earlier start this year [to holiday] because of calendar shifts. The consumer started earlier, the sector went earlier into the more promotional phase on holiday. And I’m pleased to share that we’re on plan for our holiday performance in all regions.”
In the third quarter, PVH’s net income fell 18.4 percent to $131.9 million, or $2.34 a diluted share, from $161.6 million, or $2.66 a year earlier.
Adjusted earnings per share came in at $3.03 — ahead of the roughly $2.50 the company forecast as the bottom line benefited from some timing shifts between the third and fourth quarters. Analysts had $2.59 penciled in for the quarter, according to Yahoo Finance.
Revenues for the three months ended Nov. 3 decreased 4.6 percent to $2.26 billion from $2.36 billion, taking a 2-point hit from the sale of the company’s Heritage Brands intimates business last year. Tommy Hilfiger revenues fell by 1 percent while Calvin Klein was down 3 percent.
“We again delivered on our revenue guidance, with stronger-than-expected profitability in EPS and with significant gross margin expansion up 170 basis points,” Larsson said.
Gross margins rose to 58.4 percent of sales from 56.7 percent in the third quarter last year.
While earnings for the quarter topped expectations, PVH did not move up its outlook. The company projected adjusted earnings per share of $11.55 to $11.70 for the full year, shaving 10 cents off the top end of that range since the company’s previous forecast.
PVH continues to expect revenues for the year to fall by 6 percent to 7 percent.
Investors were looking for something more and sent shares of PVH down 6.6 percent to $105.41.
But Larsson is playing the long game.
“What you see in Q3 is the continuation of step by step, putting the building blocks in place to turn the brand building consumer flywheel,” the CEO said.
“Calvin Klein’s cut through campaigns continued to drive strong engagement. Tommy this quarter crushed it with a fashion show,” he said. “That strong consumer engagement in Q3, it generated much improved sell-through for fall ‘24 products and for both brands across all channels.”
This is the first season that was created with the PVH+ mindset from the start, led by hero products that stand as pillars for the brands.
“We can see very strong performance, significantly improved sell-through,” Larsson said. “You then start to combine the stronger consumer engagement for both brands.”
And that is supported by more efficient operations and inventory controls — a project with multiple moving parts.
PVH set out last year to reduce inventory by 25 percent relative to sales.
“What we learned through that journey is that in the seasonal transitional times, we got too lean on the outgoing inventory,” Larsson said. “That is why our inventory, our outgoing inventory is optimized from those learnings coming into this seasonal transition.”
He said the company has significantly lowered inventory in relation to sales. “We are on the journey towards the 25 percent and we are adjusting along the way. That’s the demand-driven, data-driven approach that we have.”
At the end of the third quarter, however, inventory was up 9 percent from a year earlier due to a combination of early receipts in the current quarter and lean inventory levels a year earlier.
Larsson is working on a delicate balancing act. He’s changed much about how PVH operated in the past and is now working to get the new structure to mesh.
The idea is to act like an agile and quick small business while getting the benefit of PVH’s scale.
“It’s never been more needed because the consumer is in charge,” he said. “The consumer has more choice than ever before. And being more and more relevant, continuously improving, staying close to the consumer, putting more creativity and brand magic into the product, into the consumer engagement, into the marketplace execution — that’s an ongoing evolution.”
