PVH confident about Calvin Klein's expansion in Europe

By

Olivier Guyot

Translated by
Nicola Mira

Published
Mar 28, 2017

"As previously reported, our orders for the spring 2017 have grown by 20%, and I'm delighted to announce that orders for autumn 2017 are up 25%." Emanuel Chirico is unquestionably enthusiastic about Calvin Klein's performance in Europe. The CEO of the PVH group, owner of Tommy Hilfiger and Calvin Klein, is also optimistic about the immediate prospects for his labels in Europe.

It was by relying on its European business that the group has managed to keep a positive momentum going in the last fiscal year. Comparable sales for Tommy Hilfiger in the region rose in fact by 7%, yielding a 9% overall annual growth rate. As for Calvin Klein, PVH stated that its comparable sales growth was close to 10% in the last quarter. Clearly, the arrival of Raf Simons at the helm of Calvin Klein's creativity has brought renewed appeal to the label's range.

"Our domestic market has always been important, but our international business continues to grow at a faster rate, making the source of our revenue and profits increasingly more diversified, said Emanuel Chirico. We believe that this trend will simply accelerate even faster in 2017." The group reported that half of its revenue is currently generated outside the USA. In particular, the international business is more financially rewarding, accounting for between 50% and 60% of overall profit. The recently signed agreement with Li & Fung is another crucial factor in terms of the group's international expansion.

"If we look at the US retail market, it is clearly still a troubled one in the short term. This is why we are adopting a conservative approach in the region (…) For us, the biggest opportunity, and the signs are clear in Europe, is Calvin Klein, added Emanuel Chirico. The fact that Europe represents 30% of Tommy Hilfiger's business (worth approximately $2 billion altogether) gives us an opportunity to really step on the gas in this market. The label has recharged its batteries in jeans, underwear and accessories, especially for men's, but wants to grow all of its categories. Clearly, men's sportswear, men's formal clothes and the entire range of womenswear represent opportunities that are there for the taking," said Chirico.

PVH is also improving the composition of its store network: while the latter still needs to be streamlined in the USA, it is already well calibrated in Europe. As for multibrand retailers, the group explained that in Europe its top 20 partners generate 30% of its business, while in the USA its top 10 clients account for 90% of the business. And they too are now closely scrutinising their network.

"I think the footfall figures are healthier in Europe, and the currency exchange situation, especially in the UK, is very favourable too. The latter country is benefiting from a tourist influx from Europe as well as from Asia and the USA, noted Chirico. And the same can be said about continental Europe, where we can see how stores are a magnet for Chinese customers using credit cards, thanks to the euro's weakness. I believe that we are well ahead of our competitors in this respect, and that we are gaining market share and sales area in department stores."

For the 2017 fiscal year, the PVH group is forecasting a rise between 7% and 9% of its profits, equivalent to an increase between 13% and 15% before exchange rate adjustments. This will be driven by European and Asian sales, while the prospects for North America in the next few months are negative. Interestingly, PVH did not mention the impact of Brexit and of this year's French and German elections in its forecasts.