PVH Corp. is the latest company to feel the pinch of inflation in an uncertain environment.
But the parent to Calvin Klein and Tommy Hilfiger — as well as innerwear brands Warner’s, Olga and True & Co. — is readjusting its plans.
The firm revealed quarterly earnings Tuesday after the market closed, falling short on top and bottom lines because of supply chain bottlenecks, rising prices throughout the economy and excess inventory. PVH slashed its full-year guidance as a result, and now says it plans to “reduce people costs” by about 10 percent by the end of 2023 in an effort to save roughly $100 million, net of continued strategic people investments.
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Among the staff changes, Trish Donnelly, chief executive officer of PVH Americas and Calvin Klein global, will exit. The company said in a statement that Donnelly will remain in an advisory role through Nov. 30, but that the firm has already launched a global search for her replacement. PVH plans to separate her responsibilities into two roles: a regional leadership role for PVH Americas and a global brand leadership role for Calvin Klein. In the interim, PVH CEO Stefan Larsson will lead PVH Americas and Calvin Klein Global.
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“In light of continued macroeconomic headwinds, we are intensifying our focus on driving growth through the disciplined execution of our brand-focused, direct-to-consumer and digitally led PVH+ Plan, connecting Calvin Klein and Tommy Hilfiger closer to the consumer than ever before,” Larsson said in a statement. “This intensified focus includes a strong emphasis on driving product strength and consumer engagement, significantly upgrading our supply chain capabilities to become more demand-driven and simplifying how we work, resulting in substantial cost efficiencies.”
He added, regarding Donnelly, “We will significantly improve our ability to execute the PVH+ Plan by splitting these roles and bringing on leaders with different skill sets who can devote their full attention to these important roles. On behalf of everyone at PVH, I want to thank Trish for her strong commitment, hard work and dedication to our people, brands and businesses. She played a key role in helping navigate a challenging retail environment as we emerged from the height of the pandemic. She also brought together a very capable group of leaders in both organizations who are dedicated to driving the execution of the PVH+ Plan.”
In addition to the reduced headcount, PVH also cut its full-year revenue guidance. The company now expects full-year revenues will be down between 3 and 4 percent, compared with 2021’s total revenues. The firm also anticipates full-year earnings per share, on a GAAP basis, will be roughly $7.64, compared with $13.25 a year ago.
For the current quarter, total sales are also expected to decrease, down between 5 and 4 percent, year-over-year. Third-quarter EPS on a non-GAAP basis are expected to be in the range of $2.10 to $2.15, compared with $2.67 last year.
“A critical element of our PVH+ Plan is to increase productivity and invest to grow,” Zac Coughlin, PVH’s chief financial officer, said. “We are leaning into this work by streamlining our organization, implementing new ways of working and leveraging our scale. These actions will enable us to reduce people costs in our global offices by approximately 10 percent by the end of 2023 and reinvest strategically in digital, supply chain and consumer engagement connected to the PVH+ Plan. Through our strengthened execution, we remain committed to delivering strong returns for our shareholders and achieving our previously announced 2025 targets.”
But the updated expectations and cost-saving measures did little to tame investor fears. Shares of PVH fell more than 4 percent during after-hours trading Tuesday.
Total company revenues for the three-month period ending July 31 fell 8 percent to $2.13 billion, down from $2.31 billion a year earlier. Revenues in the firm’s direct-to-consumer business also declined, down 5 percent for the quarter, compared with the same time last year. Sales in the wholesale business fell 11 percent year-over-year. Total digital sales — which PVH defines as its digital commerce businesses and sales in the digital businesses of its traditional and pure-play wholesale customers — declined 7 percent year-over-year. EPS, on a GAAP basis, was $1.72, compared with $2.51 last year.
By brand, revenues at Tommy Hilfiger dropped 5 percent year-over-year during the quarter, while sales at Calvin Klein were down 1 percent. Total revenues in Heritage Brands plunged 44 percent during the quarter.
The company logged $115 million in net income during the quarter, down from nearly $182 million during 2021’s second quarter.
Like many, PVH faced industry-wide headwinds during the quarter, including continued supply chain disruptions and excess inventory from rapidly shifting consumer demand. PVH ended the quarter with inventory levels up 19 percent year-over-year, and said in-transit inventory increased more than 50 percent, compared with last year’s second quarter.
The company ended the quarter with approximately $699 million in cash and cash equivalents and $2.15 billion in long-term debt. Shares of PVH, which closed down 0.59 percent to $62.79 apiece Tuesday, are down 40 percent, year-over-year.