In the money: PVH backs Warnaco turnaround strategy
The deal, announced at the end of October, will unite the Calvin Klein apparel catetories - bringing the underwear and jeans lines, currently owned by Warnaco, back under one roof.
Speaking to analysts following the announcement of PVH's third quarter results yesterday (28 November), chairman and CEO Emanuel Chirico said: "I think Warnaco has been very transparent about the challenges in [the jeans] business, particularly in Europe, and some of the difficulties that they have worked through in North America.
"And I think a number of the initiatives that they have put in place really will start to benefit next year, particularly in the second half of the year."
He said the group's work on enhancing its regional product focus, combined with moving to a centralised design model, are also beginning to bear fruit.
"It seems to be well received in the market from our diligence and, sitting with a number of the retail accounts talking about business, I think they are being planned up in some of the major retailers for spring. We think that momentum should only accelerate as we go into fall here in North America."
In Europe however, there will be additional work to be done, with Chirico expecting a slower turnaround in the region.
"The whole business [there] needs to be repositioned. [Warnaco] were in the process of doing that; we will do that again as we integrate them on to our European platform under the Tommy Hilfiger leadership management team," he said.
As a result, Chirico is expecting sales to fall further in 2013 as the group works on repositioning the brand for profitable growth in 2014.
The comments came as the company recorded a 47.4% rise in net income over the quarter ended 28 October to reach US$165.4m, up from $112.2m in the same period last year.
Revenue, however, declined 1% to $1.6bn, as PVH exited the Izod women's and Timberland wholesale sportswear businesses, and was hit by negative currency impacts. Excluding these effects, revenue increased 4%.
Looking ahead, the company said it expects the Tommy Hilfiger brand to maintain its momentum in Europe, seeing it continuing to post low-teen comparable store sales growth, against he 5-6% initially forecast.
Chirico added that the group's spring 2013 order book is complete, and would indicate a wholesale revenue increase over the first half of 2013 of 4-5%.
"In the US wholesale businesses, both Calvin Klein and the Tommy Hilfiger business continued to perform well ahead of plan.
"We continue to see increases on our out-the-door retails, our margins at retail are very strong and we feel very confident about how this business is moving forward," emphasised Chirico.
However, he did admit that the first half of November was significantly impacted by Hurricane Sandy, hitting November comparable sales by between 250-300 basis points over the month.
In the second half of the month, Chirico said the retail business came back on track and returned to the same trends seen in the third quarter.
"As we look out into the fourth quarter, the holiday season is off to a good start."
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This report provides an update of business news in the following categories: acquisitions, divestments and mergers; company strategies; corporate social responsibility (CSR); financial results; intern...
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