PVH Corp is to slash its North American corporate workforce by about 12% and exit its outlet store Heritage Brands Retail business as the group looks to align its operations in the region with the evolving retail landscape.
The Calvin Klein and Tommy Hilfiger owner said in a statement it will cut its office workforce in North America by about 450 positions. The reductions are across all three brand businesses and corporate functions and are expected to result in annual cost savings of approximately US$80m.
Meanwhile, the group plans to shutter its 162 Heritage Brands Retail outlet stores by mid-2021.
PVH’s Heritage Brands business includes the Van Heusen, Izod, Arrow, and Warner’s brands. Global retail sales of the segment were approximately $3.3bn in 2019.
“The structural changes occurring in the North American retail landscape have required us to take a hard look at our North American operations and identify where we can optimise costs across our business model,” said PVH CEO and chairman, Manny Chirico. “As a result, we are making the incredibly difficult decisions to close our Heritage Brands Retail business and eliminate a significant number of positions throughout our North American organisation to align with the lower revenue base.
“We did not take these decisions lightly, as our Heritage Brands Retail business is our oldest retail business yet no longer met appropriate return metrics.”
PVH expects to incur pre-tax charges of about $80m over the next 12 months in connection with the actions. The charges primarily consist of severance, lease termination costs, inventory markdowns, and non-cash asset impairments.
Stefan Larsson, president of PVH, added: “While these decisions are always challenging, they are strategically important for the long-term health of PVH. The Covid-19 crisis is dramatically reshaping the retail landscape in ways that we believe will be long-term in nature and far-reaching in terms of consumer purchasing behaviour.
“We are adapting our businesses and rebalancing our cost base to improve our competitiveness and financial profile and, where appropriate, are reallocating resources to our businesses that drive greater returns. We continue to focus on delivering sustainable, profitable long-term growth for all of our stakeholders, and we will continue to advance our business by looking for additional efficiencies.”
In its most recent quarterly results, PVH reported an “unprecedented” decline in revenue and earnings. Revenue for the first quarter ended 3 May, decreased 43% to $1.34bn, while net loss amounted to $1.1bn, compared to net income of $82m a year ago.