REPORT Reverdy Johnson, [email protected]
PVH’s Calvin Klein Turnaround Will Take Even Longer Than Anticipated
Companies: BME:ITX, GES, HKG:0330, ICON, JOEZ, JWN, KORS, LVMUY, M, PVH, RL, STO:HM-B, TYO:9983, VFC March 5, 2015
Research Question:
Can PVH increase same-store-sales for its Calvin Klein and Tommy Hilfiger brands in the United States and Europe in 2015?
Silo Summaries Summary of Findings 1) European Department Store Executives . PVH Corp.’s (PVH) revitalization of Calvin Klein already was These five sources believe PVH managing CK is a expected to be a slow process and now is proving to be even positive for the brand and will result in eventual lengthier than anticipated. Sources who contributed to Blueshift success, but also said the turnaround will take longer than originally expected. The spring CK line appears to Research’s May and/or September 2014 reports now are less have improved incrementally, but one source said initial optimistic and said the timeframe to success has been extended. feedback from a small sample in the stores is negative. . Sources are not excited about Calvin Klein’s sales prospects in Two sources said fall is a further improvement on spring in terms of quality and branding, but the small gains 2015 based on a litany of challenges in revitalizing the brand, but underscore the slow turnaround. TH saw a boost in they also noted potential incremental gains on easy comparables sales in Jan. and Feb. following disappointing results in from a poor performance in 2014. the warmer fall and early winter.
. Sources were split on Tommy Hilfiger’s 2015 prospects as it is a 2) European Industry Specialists well-respected premium brand in Europe but is expected to All six sources said PVH is the right organization to struggle in the United States. One supply chain source said its reinvigorate CK, but all acknowledged the sizable task orders from Hilfiger are down 25% year to year and other suppliers and the length of time needed to get there. Only two have similar pullback. sources believe CK can increase sales this year despite easy comps with 2014. TH continues to do well and is . Four sources said overall customer demand for denim is waning. expected to be flat to up in 2015. CK is beginning to . Calvin Klein jeans are stymied by uninspiring styles and colors; a benefit from its association with TH among buyers. lack of variety; nonpremium quality as the company focuses on 3) U.S. Supply Chain improving its bottom line instead of on better materials; and a These four sources expressed concern for PVH’s ability crowded market in which more popular brands with better looks to deliver strong results with its CK and TH brands in are charging lower prices. 2015. PVH is emphasizing margins and has opted for lower-quality materials to grow its bottom line. One . Calvin Klein also needs to improve its distribution in Europe to source is less optimistic about PVH and CK than in increase its presence in stores, where sources said inventory is Sept., forecasting a decline in denim reorders and high and reorders are low because of slow demand. lower-than-expected sales this year. One source said . Sources could provide little insight into sales performance of the TH’s spring product was off to a slow start. No source had insight into CK’s spring product line. new spring lines for Calvin Klein or Tommy Hilfiger given that their cycles are just beginning. The few who did offer information said 4) U.S. Industry Specialists the new products were an incremental improvement from previous Both sources said PVH could grow in 2015 if it makes collections but that initial sales were tepid. A few sources also the right choices. The first source said PVH could grow expressed some optimism for the fall line, saying it was yet another in the mid-single digits and peak during back-to-school step above the spring collection. season. CK will only show incremental improvements this year. One source suggested the brand look into . Still, sources agreed that PVH is the right company to be in charge featuring its products in outlet stores for potential $150 of this turnaround with its resources, know-how, and industry million to $200 million revenue. reputation, and it stands as good a chance as any in executing its strategies over the long term. It has made headway in building 5) U.S. Macy’s Store Visits brand awareness through advertising and marketing messages, All five sources said CK denim sales have not increased improving communication with buyers and store executives, and from a year ago. Four said sales growth is possible this getting the industry to talk about Calvin Klein once again. year, though none said this was a likely occurrence. The displays have not done much to increase sales or traffic, including at one store that houses a shop-in- shop. TH is meeting denim sales expectations in two stores, is flat in one store, and is down in another.
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
Calvin Klein Sales Tommy Hilfiger
in 2015 Sales in 2015
European Department Store Executives
European Industry Specialists
U.S. Supply Chain
U.S. Industry Specialists
U.S. Macy’s Store Visits
Background PVH’s revenue rose 2% during the third quarter of 2014 year to year on the backs of its strong Tommy Hilfiger brand and improving Calvin Klein brand. Tommy Hilfiger’s North American sales revenue grew 3% while comparable store sales in Europe declined 5%. Corporate expects Hilfiger’s wholesale business in Europe to pick up steam in the spring and summer as its 2015 order book is up more than 5% year to year. North American comp stores sales of Calvin Klein increased 5%, while international comp store sales dropped 2% year to year. PVH is increasing the footprint of its Calvin Klein jeans by adding 180 shops in North America, and is taking the same strategy to Europe. It is beginning to see initial positive results for spring and summer 2015 with its order book for Calvin Klein up 10% year to year.
Blueshift Research’s Sept. 25, 2014, report showed PVH’s strategy beginning to take shape in Europe, with the potential for a turnaround of its Calvin Klein brand. The execution of its strategy in the United States was inconsistent but held promise. Repeat sources in Europe had noted improvement for Calvin Klein since Blueshift’s May 19, 2014, report, but said the brand had a long way to go to revive its jeans brand. European sources also said Calvin Klein must continue to innovate, become trendier, and appeal to younger audiences if it hopes to compete in the market. Tommy Hilfiger orders in Europe remained healthy, and sources believed the brand’s presence would help Calvin Klein by leveraging its existing retail-level infrastructure. Blueshift’s Oct. 13, 2014, report uncovered success for PVH’s shop-in-shop rollout for its Calvin Klein men’s jeans within U.S. Macy’s Inc. (M) stores.
Current Research In this next study, Blueshift Research assessed whether PVH could increase same-store sales for its Calvin Klein and Tommy Hilfiger brands in the United States and Europe this year. We employed our pattern mining approach to establish six independent silos, comprising 22 primary sources (including 13 repeat sources) and nine relevant secondary sources focused on developments for Calvin Klein and Tommy Hilfiger: 1) European department store executives (5) 2) European industry specialists (6) 3) U.S. supply chain (4) 4) U.S. industry specialists (2) 5) U.S. Macy’s store visits (5) 6) Secondary sources (9)
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
Next Steps Blueshift Research’s next report on PVH will follow up with sources as early as April to get a pulse on the sales performance of the Calvin Klein and Tommy Hilfiger spring lines, on orders for the second half of the year, and on the fall collection for back- to-school. We also will include a deeper look at the Calvin Klein shop-in-shop rollout in U.S. department stores and the corresponding effect on sales. Lastly, we will take a closer look at Calvin Klein and Tommy Hilfiger sales and growth opportunities in East Asia and South America.
Silos
1) European Department Store Executives These five sources, who all have taken part in Blueshift’s previous reports, believe PVH managing Calvin Klein is a positive for the brand and will result in eventual success, but also said the turnaround will take longer than originally expected. Calvin Klein is making slow progress in addressing its problems, particularly in becoming a trendy brand with current styles, colors and variety. Also, its prices are too high and out of step with its peers. Two sources reported declining sales of Calvin Klein year to year in 2014 and into 2015, and two other sources maintained their lack of desire or intention to carry the brand. The spring Calvin Klein line appears to have improved incrementally, but one source said initial feedback from a small sample in the stores is negative. Two sources said fall is a further improvement on spring in terms of quality and branding, but the small gains underscore the slow turnaround. Still, PVH has improved communication with buyers and store executives and has built a stronger marketing campaign. Tommy Hilfiger products are far steadier than Calvin Klein, and saw a boost in sales in January and February following disappointing results in the warmer fall and early winter.
Key Silo Findings PVH Strategy - 5 of 5 sources still believe PVH taking over management of the Calvin Klein brand is a positive development for the brand and eventually will lead to its success. - 4 said the turnaround for Calvin Klein will take a long time. o 2 expressed concerns that it would take longer than they previously expected. - PVH’s influence has not changed the brand’s style, variety, color, trendiness and pricing enough, showing how hard it is to turn around a struggling brand. o Cost remains an issue as the brand is priced too high for what the customer gets, especially compared with competitors. - PVH has helped improve communication with buyers and store executives, and has delivered a more noticeable marketing campaign. - 2 sources in Spain continues to see the value of having Pepe Jeans work with PVH. Calvin Klein - 2 said Calvin Klein sales have declined year to year and inventory is high, resulting in limited to no product reorders. o 1 said sales were worse than expected. - 2 others said they still are not interested in carrying Calvin Klein. - 1 said spring 2015 product is getting negative feedback from a small initial rollout in stores. - 2 said spring 2015 product is a slight improvement but still is too cautious for what the brand needs in order to recapture customer attention. o Both said fall 2015 products are showing improvement over spring and have better quality and branding. Tommy Hilfiger - 1 said sales are mixed, down in the fall because of warm weather but then up in January and February. o Spring product sales are slow, but it is too early in the season to draw conclusions. - 3 said Hilfiger is strong and does not present the challenges that Calvin Klein does.
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
1) Head buyer for various premium brands, including Calvin Klein, for a department store in Spain; repeat source Sales for Calvin Klein denim lines fell in both women’s and men’s. Orders appear better because of the strength of this department store chain, but stocks were high, which resulted in Calvin Klein lines having to be discounted or promoted to activate demand that was lower than expected. As a result, the department store has not since reordered. Calvin Klein’s poor performance was due to its dull collections, high prices and stronger competition. Also, Calvin Klein continues to suffer from a lack of consumer awareness; most consumers in Spain associate the brand with underwear and perfume instead of denim. The spring collection is still too new to assess. Although this source understands the company is going through the growing pains of being managed by a new company, she was surprised Calvin Klein’s performance was worse than expected given that it now is being managed and distributed by Pepe Jeans. Sept. 25, 2014: PVH’s purchase was a significant development for Calvin Klein’s future. This source had begun to see signs of improvement in styles, prices and communication, though said changing the image of a brand would take time. Calvin Klein faced strong competition in the jeans sector, at both the lower and higher segments of the market. Several retailers were offering nicely designed private-label jeans that were priced very competitively. On the upper end, Calvin Klein competed with brands that were viewed as premium. Prices for Calvin Klein were too high for Spain, but this source said the brand’s strategy of lowering prices, improving market communication, offering trendier styles and widening distribution at more upmarket locations should help the brand gradually regain share. The Calvin Klein brand was still well known, and its challenge was to increase awareness of it as a jeans brand. May 19, 2014: PVH’s Warnaco acquisition was a very positive development. The new Calvin Klein Jeans distributor in Spain and Portugal was Pepe Jeans, which has in-depth knowledge of the Spanish market. Pepe already had launched more innovative and younger collections and lowered the pricing for Calvin Klein. Overall, this source expected Calvin Klein Jeans to improve its brand image and sales in Spain but would need time to convince consumers that it is a desirable brand. PVH Strategy . “It is difficult for me to tell you whether Calvin Klein will be able to increase I am surprised and their same-store sales in our shops because of strong competition from disappointed to see that they other brands with more successful collections, and some weaknesses in the haven’t turned the brand brand they need to tackle.” around. I know this will not be . “I reiterate my opinion about how positive I see the fact that Calvin Klein changed hands having Pepe Jeans as its distributor and not Warnaco something that will happen anymore.” overnight, but I am surprised to . “Pepe Jeans knows the Spanish market very well and also knows us very see that their collections are well. However, I am surprised and disappointed to see that they haven’t still rather repetitious and turned the brand around. I know this will not be something that will happen boring. … They are still going overnight, but I am surprised to see that their collections are still rather repetitious and boring.” through those growing pains in . “They don’t seem to have a very clear strategy at the moment. Of course our stores and in Spain in they have to go through the growing pains of changing hands, which is general. … Their performance is understandable, but … they are still going through those growing pains in definitely worse than expected our stores and in Spain in general.” for me. . “The thing that has changed since May is that Pepe Jeans really listens to us a lot; they have become aware of all our concerns with regards to the Head Buyer, Various Premium Brands collections, a seemingly arbitrary pricing strategy, some late deliveries, etc. Department Store, Spain The problem is that although [Pepe Jeans is] a very professional company, with very good communications and open and flexible, they always end up telling us that they have communicated our concerns to PVH, but at the end of the day not much has been done. They say very often that the final decision can only be made by PVH. For instance, their pricing strategy is not a clear one, we have told them that the Calvin Klein brand is not positioned in Spain at the same level as where it is positioned in the States. In Spain, it is already regarded as a premium brand, so what they did is lower the prices of their lowest and most affordable lines but increase the prices of their more expensive articles, which was a bit funny and somehow not consistent.” . “After Pepe Jeans, Calvin Klein continues to be related more to underwear and perfume than to denim. Not many people here would relate Calvin Klein with jeans or denim. It is going to be a long process.”
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
. “In Spain, the Calvin Klein brand is already at a higher-end status, higher than in the States, so PVH doesn’t have to bring it to a higher status. What they need to do is improve their collections to begin with; if the product is weak in such a competitive market, it is very difficult to activate demand.” . “Not everything is negative. Since September there are more positive changes, such as an increase in investment in advertising, with a recent campaign launched [at the end of November 2014] with Justin Bieber.” . “Also, PVH shouldn’t forget that in Spain the Calvin Klein brand—unlike in the U.S.—is already positioned as a premium brand, so [PVH] doesn’t need to do anything to bring it higher up in the market.” . “Another thing that PVH should keep in mind is the Spanish market and the huge presence of Inditex [S.A./BME:ITX] stores. Inditex is the largest fashion retailer in the world, and it is a Spanish company with a huge presence in this country. Zara, Massimo Dutti and all the other retail chains under the Inditex umbrella also enjoy lots of loyalty. They really revolutionized the fashion retail scene in Spain, bringing fashionable and trendy collections with very good cuts at very affordable prices. It shouldn’t be forgotten that Calvin Klein is competing with Zara jeans that are very trendy with a wide range of lines, some of them very classy and appealing at different types of consumers, at very affordable prices.” Calvin Klein . “I have seen the fall 2015 collections. Although there are improvements vs. the previous collections with a wider range and slightly better styles, the range and colors are still a bit limited. … Some of the patterns are not that good in terms of the sizes. They have promised us they will change that, but I won’t know until I see them.” . “However, the quality has improved with every collection.” . “With regards to jeans, I like the fact that the label with Calvin Klein on it is more visible now, which is always positive in Spain for brand-oriented people here. Their style has also improved, but their accessories are still not that innovative. They still have to improve more.” . “Although it is still too soon to assess the performance of the spring collections, because we have only put a small portion on the shelves, the feedback we get from the stores is that they are not happy with consumer response at least so far.” . “Same-store sales during September through end of February were down both for the women’s and men’s lines by 14% and 7%, respectively.” Same-store sales during . “Apart from what I have already said, the main reason behind this poor performance is down to their collections. They are boring, repetitious and September through end of too expensive.” February were down both for . “Our stocks were and are still high; as a result of that we haven’t reordered. the women’s and men’s lines Quite the contrary, because their sales have been lower than expected, by 14% and 7%, respectively. … they have introduced … all kinds of promotions and discounts to sell their Our stocks were and are still stuff, and still they are not selling as expected. The problem lies in their collections, price positioning, and lack of consumer awareness of Calvin high; as a result of that we Klein as a denim brand.” haven’t reordered. Quite the . “It is still too soon to assess sales of their spring collections; we have only contrary, because their sales started to put them on the shelves and only very timidly this week. We’ll have been lower than introduce them in about 10 days at the beginning of March.” expected, they have introduced . “Their performance is definitely worse than expected for me. I know that things cannot happen overnight, but I was expecting the brand to do better … all kinds of promotions and more quickly in Spain with the help of Pepe Jeans. It surprises me to see discounts to sell their stuff, and that a bit, because Pepe Jeans distributes other brands in Spain that are still they are not selling as doing very well.” expected. . “There are some competitors that are much stronger and with a clearer brand image, such as Lewis and Diesel with trendy collections [aside from Head Buyer, Various Premium Brands their classics] and a clear price strategy.” Department Store, Spain . “As I said last time, [PVH’s] pricing strategy comes across as a bit arbitrary. They lowered the prices for their more affordable lines but increased the ones positioned higher up, resulting in too high prices. That confuses us, as buyers but also consumers.” . “Also, their collections are almost the same every time, collection after collection, which really surprises me with Pepe Jeans behind them. [Pepe Jeans] says that is the way the brand is; it is frustrating because nothing is being done to make it more trendy. It is almost contradictory; they want to make their brand more appealing to be able to sell more, but their brand is not appealing.”
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
. “The average price of a Lewis [pair of jeans] is around €99 for women and men. They are supported with lots of advertising, very good presentations, and their collections are trendy. They have a wider range of styles than Calvin Klein, and its offer is more clear, more recognizable. By contrast, for a Calvin Klein pair of jeans, the cheapest you can find is €110, and that is too expensive. And their denim jackets are around €189.” . “The ones that are doing very well at the moment are AllSaints or Jack & Jones with coats retailed at €49, with very strong advertising support in outdoor extensively in the underground, buses, etc. and most importantly with an attractive collection.” . “Pepe Jeans denim continues to do well, with their jeans’ retail prices ranging from €69 and €110 maximum and their jackets from €89 till €99.” . “Even in their colors, [Calvin Klein’s] assortment is rather limited with gray, white, salmon, yellow, blue and aquamarine, and in winter it is just gray, black, petroleum and navy blue. It is always the same.” . “In addition, their brand is not recognizable in terms of styles. If you see G-Star [RAW] pair of jeans or Diesel, it is very recognizable. The same happens with Pepe Jeans’ collections. But you wouldn’t be able to easily recognize a Calvin Klein jeans or their denim lines. They don’t have a clear style, and that is not very good for the brand. … They are not making the most of their logo.” . “Something that I think will work well for them is going to be their Capsule Collection, which will comprise the launch of some styles that used to be modeled by Kate Moss in the ‘90s. That will appeal to the nostalgic, but this collection is going to be limited.” . “I know that people at Pepe Jeans are very open to listening to us … and they know the market very well and what the consumer wants. At the end of the day [Pepe Jeans is] a denim company that has penetrated the Spanish market very successfully. So … PVH should know that their Calvin Klein brand is different in Spain to the brand in the U.S. in terms of its positioning and pricing.” . “In the U.S. it was positioned further down. Calvin Klein jeans have always been more expensive in Spain. It seems as if PVH wanted to introduce the same strategy in Spain and in the U.S. But they cannot increase their prices more in Spain because their denim lines are simply too overpriced here.” . “With other brands on the shelves offering trendier and stronger collections in the denim sector, no wonder Calvin Klein denim is not doing well in Spain.” Tommy Hilfiger . “Tommy is performing better than Calvin Klein. It has a wider range of lines that are more suited to the Spanish consumer. Although Calvin Klein is a very well-known brand, consumer perception of Tommy Hilfiger is better. The message is better; preppy American works very well with a certain type of consumers in Spain.” . “I’m not the Tommy Hilfiger buyer in Spain, so I don’t have more details than that.”
2) Head buyer for various premium brands, including Tommy Hilfiger, for a department store in Spain; repeat source Tommy Hilfiger continues to be a strong brand, but sales have been sluggish during the fourth quarter of 2014 and the first quarter of 2015 so far, mainly due to unseasonably warm weather. The collections continue to have a loyal following but could be more innovative. Hilfiger is likely to increase sales this year, but competition remains tough. Its quality is high, but so is its price. Sept. 25, 2014: Sales and orders of Calvin Klein women’s wear had declined during January to date year to year. This source blamed Calvin Klein’s transitional period, including reported some late deliveries. It still was too soon for changes in styling, advertising and price to materialize in a gain in momentum. The main challenge for Calvin Klein was to increase consumer awareness of its identity as a jeans brand. May 19, 2014: PVH’s acquisition was expected to improve the styling and boost sales of Calvin Klein denim. The brand was getting trendier and younger, especially in color, finishing and wash. It was more focused, was improving retail distribution channels by not providing the product in all locations, and was lowering prices. Calvin Klein’s image and consumer perception could rebound. Results from the new strategy were expected to be noticeable by the winter season. PVH Strategy . “The fact that Calvin Klein is now under the umbrella of PVH hasn’t had any impact on Tommy Hilfiger in terms of distribution. In our stores, these two brands are now being managed almost entirely independently.”
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
. “Pepe Jeans isn’t managing Tommy Hilfiger for us. In other words, Warnaco’s purchase of Tommy Hilfiger hasn’t resulted in a change in distribution in Spain.” . “Tommy Hilfiger is being distributed and managed by Tommy Hilfiger directly, with their European headquarters in Amsterdam. I haven’t seen any changes since Warnaco’s purchase by PVH. Tommy Hilfiger has continued to be a very professional company to work with, with great communication, open to adapting itself to our needs and requests, and very reliable.” . “My view on PVH’s strategy with regards to Tommy Hilfiger remains positive as always. It is a very strong brand in Spain, which is very established and consumer perception of the brand is very strong. PVH is a very strong company with the know-how to continue to positively support Tommy Hilfiger.” . “Tommy Hilfiger is in position to increase its sales in 2015 in Spain. This will also be helped by easier comparables and an improving economy. People Tommy Hilfiger is in position to have started to spend more on fashion again. They had been very price- sensitive during the crisis, but consumer sentiment is improving, which will increase its sales in 2015 in benefit premium brands, including Tommy Hilfiger.” Spain. This will also be helped Calvin Klein by easier comparables and an . N/A improving economy. … Since Tommy Hilfiger . “Since the last time we spoke in September, demand for Hilfiger has been the last time we spoke in mixed. It went down from October to December compared to the same September, demand for Hilfiger period in 2013 mainly due to unseasonably warm weather and a relatively has been mixed. It went down mild winter. Sales have started to pick up during January and February from October to December compared to the previous months, and has remained the same vs. the compared to the same period same period last year, mainly helped by cold weather.” . “Tommy Hilfiger’s collections are very standard. They really follow their in 2013. … Sales have started brand image with a very clear identity. Their styles are very easy to to pick up during January and recognize; the same cannot be said about Calvin Klein.” February compared to the . “It is a very strong brand with us. It occupies a relatively large space on our previous months. shelves, and it hasn’t lost this strength.” . “I think Tommy Hilfiger could sell more in Spain. The brand image is great. It Head Buyer, Various Premium Brands, is a premium brand with a great perception, but they should introduce a Department Store, Spain wider range of stuff to increase demand from their current customer group.” . “Although their styles are good and remain popular, I believe they should introduce more innovation in their lines. Yes, their styles work very well, but they should have a wider range of colors and designs.” . “The warm lines continue to do very well. People are prepared to spend an extra bit on coats by Tommy Hilfiger because of the good quality of its materials, finishing and styles. However, the more basic lines, such as cardigans, for instance, are receiving more competition from other brands that retail at slightly lower prices.” . “Competition is tough. There are more brands on the shelves, and some of them offer very nice styles that retail at lower prices than Hilfiger.” . “Spring collections are going slowly, but it is still too soon.”
3) Independent buyer of midrange to higher-end clothing brands in Italy, Spain and Portugal; repeat source PVH’s strategies still are new to have materialized into sales growth. Calvin Klein sales have been down due to warm winter weather and the economy. Also, PVH’s changes, including in communication, are still not enough. Collections remain weak in terms of assortment and style. Tommy Hilfiger also has been hit by the weather and the economy, but is set to record sales growth thanks to the collections and advertising. Sept. 25, 2014: PVH’s purchase was a positive for Calvin Klein Jeans, but the brand was not likely to regain share in the near future. The changes PVH had introduced were not enough for Calvin Klein to rebound, as the styles were not appealing to the Southern European woman. Calvin Klein’s price strategy had been very arbitrary and inappropriate. Calvin Klein would benefit from PVH’s know-how and resources, but Calvin Klein Jeans was trying to find its place in a market that had become much more competitive and saturated. Consumers were less brand-oriented and more style- oriented. Underwear continued to perform well.
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
May 19, 2014: Calvin Klein Jeans’ acquisition would be a positive for the brand. It had lost share amid tougher competition. Calvin Klein should concentrate its efforts on its collections and marketing. PVH Strategy . “It is still too soon to see the new strategies by PVH start materializing into sales. Sales for both Calvin Klein and Hilfiger have declined like for the other brands we carry due to the weather and the economy.” . “The effects of the [PVH taking over Calvin Klein] will take longer than expected.” . “In Southern Europe, [PVH] should improve their collections even more and their prices, which I still find very arbitrary. Their styles have improved, but they are still either not varied enough or just too clean, which is the image they want to give. For [European or Southern European taste] they are still a bit boring. Because of this, people find them a bit too expensive for what it is.” . “However, I give them credit; they are trying to amend things. But they are still struggling to sell. I think they continue to test the market here and it will Something very positive that I be a medium to short-term thing. We should give them more time. Nothing much has happened since September.” see is that they are . “Something very positive that I see is that they are communicating much communicating much better better and more than before [being acquired by] PVH, and this will pay off.” and more than before [being Calvin Klein acquired by] PVH, and this will “Calvin Klein sales were down with us both in men’s and women’s, and our . pay off. … Calvin Klein sales inventory has been rather high. It has been the case for most brands we carry.” were down with us both in . “I don’t expect Calvin Klein to increase sales in 2015. They did very badly men’s and women’s, and our last year in the three countries I cover.” inventory has been rather high. . “Inventory is so high with us that we still have some stuff we ordered from … I don’t expect Calvin Klein to Warnaco that needs to be sold. We are introducing discounts, but still they increase sales in 2015. They are not selling well.” . “Their collections in spring are a bit better than the previous season, but it did very badly last year in the is as if they were too cautious, as if they didn’t want to make the wrong three countries I cover. step. It is good they are trying to improve them, but I don’t think it is enough. It is too soon to assess their performance. We will put them on the Independent Buyer of Higher-end Brands, Italy, Spain & Portugal shelves more extensively in March. The weather has been too cold for people to start thinking of spring apparel.” . “I have seen their collections for autumn. Again, there is an improvement over the spring collection but still a ways to go. Something good is that their branding label has been put in a more visible place in their jeans, for instance.” . “Although their collections have improved, the improvement hasn’t been significant enough. Their assortment is still limited with a limited number of colors. And their fit is a bit too big with too wide shoulders and arms, but proportionally very narrow in the lower part of the T-shirts and sweaters.” . “They are better and their quality has definitely improved compared to a year ago, so I think they are going in the right direction. But they have a long way to go.” Tommy Hilfiger . “There is no problem with Tommy Hilfiger. It has only been weak because of the general situation in Europe, which is likely to be temporary. Their collections work very well. They are American and that is what they sell, but they are very well adapted to our taste.”
4) Denim buyer for a buying group in Germany; repeat source This group still is not interested in carrying Calvin Klein. PVH is a positive for the brand, but the expected improvements are taking a long time to emerge as poor distribution in Germany remains a problem. Sept. 25, 2014: This source’s group did not carry Calvin Klein anymore, as the brand was failing years ago. There had not been any conversations about renewing the partnership, though the source acknowledged improvement in the product and some increased buzz under PVH. PVH Strategy
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
. “I am sure that it is going to be positive for Calvin Klein to be managed by PVH, but it takes a long time for things to start happening in the marketplace.” . “After a while if we see that a brand is not working, we wait, try to introduce new strategies. If we still see that it still doesn’t work, we just stop carrying it. That’s what happened with Calvin Klein. It is still poorly distributed in Germany. I don’t think we were the only ones to make that decision.” Calvin Klein . “We definitely haven’t considered carrying it again in spite of [Calvin Klein having PVH behind it]. Also, this is not the best moment to carry new brands. The economic situation is not buoyant yet, and people are not spending so much on denim and clothes in general. They are spending more on other things such as electronics. There is no point calling me for a while because we won’t change our minds in terms of carrying it in the short term.” Tommy Hilfiger . N/A
5) Denim buyer for a buying group representing independent stores in the United Kingdom; repeat source These stores still do not carry Calvin Klein. PVH brings good management and a lifeline to Calvin Klein, but it has a long way to go to get the brand back on track in the United Kingdom. Sept. 25, 2014: This source no longer worked with Calvin Klein jeans, as the brand had lost its luster. However, news of the changes brought on by PVH were beginning to make the rounds, and the brand was receiving some credit for an improved look and better distribution. This source’s company had maintained its relationship with Calvin Klein underwear, and the product remained strong. PVH Strategy . “I see PVH taking over Calvin Klein as positive. The brand will eventually be more respected at a business-to- business level. That’s where things start really before they go onto the retail level. It had lost the respect of some distributors here.” Calvin Klein . “We don’t carry Calvin Klein jeans for the same reasons I explained to you last time. We stopped working with them because we didn’t agree with some of their stuff, and they were very poorly communicating and didn’t agree with their distribution. It just stopped being profitable for us.” . “I know things are probably on the right track to change positively in the future, but we will wait. Of course we monitor the market, but it is not an attractive option for us now. Whether or not it will be in the future, we’ll have to see how it develops, but this won’t be a short-term thing.” . “We still carry their underwear lines, with stable demand.” Tommy Hilfiger . N/A
2) European Industry Specialists All six sources said PVH is the right organization to reinvigorate Calvin Klein, but all acknowledged the sizable task and the length of time needed to get there. PVH is putting resources into improving advertising, building brand awareness, increasing communication within the industry, and delivering a higher-quality Calvin Klein product. However, it still must overcome high prices, limited retail distribution, and product designs and styles that are not inspiring enough in a crowded field in which denim appears to be trending down. Only two sources believe Calvin Klein can increase sales this year despite easy comps with 2014. One source said the spring line is just now being launched and is too new to evaluate. Tommy Hilfiger continues to do well and is expected to be flat to up in 2015. Customers see the value in Tommy Hilfiger and are willing to pay the prices. Two sources said Calvin Klein is beginning to benefit from its association with Tommy Hilfiger among buyers.
Key Silo Findings PVH Strategy
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
- 6 of 6 sources expressed confidence that PVH is the right organization to see Calvin Klein through its turnaround, but they also cautioned that it would take a long time to see the full benefit of its efforts. - PVH is improving its advertising, brand awareness, visuals, communication, and product quality. o 2 sources expressly said the industry is beginning to talk about PVH and Calvin Klein again. - PVH still needs to improve distribution, address high prices, and expand designs and styles to combat competitors. - PVH appears to have the right strategy but is having a difficult time in execution. - Sources continually said the company needs more time and has a long way to go to achieve its objectives. - 2 also said the denim industry is undergoing challenging times, making it harder on PVH to rebrand Calvin Klein. Calvin Klein - Only 2 suggested Calvin Klein might see a sales increase in 2015, despite what all acknowledged were easy comps. - 1 said orders are better than sales as customers are not yet on board. - 2 others said sales were sluggish and likely would be lower than a year ago. - 1 said new styles still are not different enough to catch attention and drive sales. - 1 said the look needs to add an element of fun. - 1 said it was too early to assess the spring line, which will launch more completely in March. Tommy Hilfiger - 6 said Hilfiger sales will be flat to up in 2015. - Demand remains strong; it is a more highly regarded brand deemed worth its higher price. - 2 said buyers are more open to giving Calvin Klein a chance because of the PVH and Hilfiger connections.
1) Fashion expert specializing in denim in Spain and Portugal; repeat source Not much has happened since September, and the changes at Calvin Klein still are too new to have an effect on demand. Sales remain sluggish, driven in part because of unseasonably warm weather and strong competitors offering more innovative styles at more affordable prices. Calvin Klein is taking the right steps to increase awareness as a denim brand by investing in advertising and in communications, opening stores, and making some improvements in its collections. Sept. 25, 2014: PVH taking over Calvin Klein was a positive development for the brand. Some changes already had been introduced, including increasing publicity and communicating at a business-to-business level. PVH also was investing in distribution, relocating to better places and enlarging existing stores. PVH’s efforts to improve the style and quality of Calvin Klein had materialized through more stylish and younger collections, but its image needed further enhancement. These changes likely would translate to material improvement by spring/summer 2015 at the earliest. PVH Strategy . “Like I said last time we spoke, PVH is doing the right thing to enhance its Calvin Klein brand in Spain and Portugal by increasing investment in I don’t see the fact that their advertising targeted at the final consumer and increased communication sales are still weak in a business-to-business. Also, they are opening new standalone stores in Spain. With the help of these initiatives, they want to increase brand pessimistic way. They just need awareness and make Calvin Klein a reference brand, a brand people think more time, but I believe they of when buying apparel and denim. However, this is not the case now, not are doing the right things to yet.” achieve this. … It is likely that . “Since the last time we talked, they have continued with these two main Calvin Klein may increase sales strategies, but it is too soon to see a real impact on sales and demand. PVH is still at the first stages, concentrating on the brand image and increasing though it is difficult to say if it its consumer awareness, and this is a slow process.” will be in 2015. I know that so . “I don’t see the fact that their sales are still weak in a pessimistic way. They far their sales are still very just need more time, but I believe they are doing the right things to achieve sluggish and down year to year, this.” but they are making the right . “Their prices are a bit too high in Spain, and their collections are still not that European. They need to adapt them more to the European taste, but steps. concentrating on prices now would be the second stage of their strategy Fashion Expert Specializing in Denim, Spain & Portugal
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
and they are not quite there yet. They are focusing on the brand image and awareness first.” . “They are also introducing collections that are a bit more adapted to the European taste, which is positive, but they need to improve them more to make them more appealing.” . “Calvin Klein is perceived as a premium brand in Spain, but their prices are a bit too high for what they offer because their collections are still nothing extraordinary. Also, competition is strong from other brands such as Diesel, G-Star and private labels by successful retail chains, such as Zara, Mango, H&M [Hennes & Mauritz AB/STO:HM-B].” . “This is the right moment for PVH to turn Calvin Klein around as the economy is recovering, private consumption and demand are generally increasing, and there are a few chains, like Esprit [Holding Ltd./HKG:0330], for instance, that are increasing their sales in Spain. This is the right time to start but it will be a long way.” Calvin Klein . “Sales of Calvin Klein jeans are still weak because of strong competition and a warm autumn and winter.” . “While I still believe their collections are not that strong, there are a few things happening that could make Calvin Klein sales increase, which are a higher investment in advertising, the launch of slightly more European collections, and the opening of more standalone stores, coupled with a very bad year-on-year comparables in 2014.” . “It is likely that Calvin Klein may increase sales though it is difficult to say if it will be in 2015. I know that so far their sales are still very sluggish and down year to year, but they are making the right steps. Also, they have Pepe Jeans behind them, which has managed other successful brands very well, including Tommy Hilfiger.” . “PVH is doing the right thing, but these things happen slowly. They still have a lot of work to do with Calvin Klein here until the general public relates the brand with a total look instead of relating it to only lingerie.” . “I understand PVH cannot adapt its strategy to every single market in Europe, but Spain is a unique case. Any fashion brand entering the market finds it very difficult in Spain. Competition in terms of stylish and affordable collections is particularly strong here.” . “Zara has really high levels of loyalty and great market penetration, offering very trendy, stylish and affordable apparel with collections that are renewed constantly.” . “Calvin Klein lingerie has stable demand in Spain because people are prepared to spend that extra bit of money for it. Calvin Klein underwear has a very strong brand identity. But the same cannot be said about Calvin Klein denim.” . “If you asked me to tell you about Calvin Klein denim as a brand, I wouldn’t be able to tell you anything other than the fact that it is an American brand. If you asked about other brands, like Tommy Hilfiger, I would be able to tell you that it is a brand that is targeted at 30-plus-year-olds, is very preppy, very aspirational, that the bulk of its consumer base is of mid- to high-income group, etc.” . “They are trying to make Calvin Klein look younger with the advertising campaign featuring Justin Bieber, but not enough time has gone by. It takes longer for a brand to be turned around; it is still too soon. … They need to be given more time to see the real effects on demand.” . “One of the most positive things for Calvin Klein in Spain at the moment is that they have a great partner: Pepe Jeans.” Tommy Hilfiger . “I don’t have figures for Hilfiger sales, but I know it continues to be a very strong brand. Everyone can recognize their styles.” . “They are positioned slightly further up than Calvin Klein, but people are prepared to pay that extra bit for what they consider added value.” . “Their advertising campaigns continue to be very well targeted.” . “PVH and Pepe Jeans have managed to make the brand very aspirational and very status-oriented. It is a premium brand retailed at prices that people are willing to pay. I find their collections a bit classical, but they work.”
2) Editor of a fashion publication focused on denim and casual wear, Germany; repeat source PVH continues to implement its strategies, which are mainly a higher investment in marketing and a wider distribution of Calvin Klein at a retail level. Calvin Klein faces strong competition from other fashion retailers but is on the right track to turn things around. The process will be long. Calvin Klein is likely to increase sales in 2015 because it is coming from a low base. Tommy Hilfiger is a well-established brand likely to continue to enjoy solid demand. Calvin Klein should use PVH’s synergies with Hilfiger to expand its retail distribution and get retailers on board.
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
Sept. 25, 2014: PVH was taking the right steps to improve Calvin Klein’s position in Germany, investing in an advertising campaign with a younger image, message and style accompanied by wider distribution at the retail level and at more upscale stores. These actions had the potential to increase Calvin Klein’s share in Germany over the next few years. Competitors were more innovative in their styles and advertising. Having PVH for support should benefit Calvin Klein. PVH had taken the first steps to make Calvin Klein a stronger denim brand in Germany. May 19, 2014: PVH would have a difficult time reviving Calvin Klein denim in the near future. The brand had suffered significant losses in the last 10 to 15 years because of greater competition from more innovative brands with more active marketing. PVH had the know-how with its Tommy Hilfiger success, which should enhance the Calvin Klein brand over time. Calvin Klein was perceived as more of an underwear brand in Germany. PVH Strategy . “PVH is being much more active with the Calvin Klein brand than Warnaco was in the past. Calvin Klein is trying to tap into its heritage that worked very well in the 1990s and appeal to that consumer segment by launching vintage lines from the 1990s and even using models that remind us of the top models used for Calvin Klein ads then, such as Lottie Moss, which people relate with her sister, Kate Moss, who modeled for Calvin Klein 20 years ago.” . “This is the right step as there is a comeback to the 1990s, and it will appeal to consumers who were younger in the 1990s but with a higher income now.” . “Their communication has improved; it is cooler now. Their visuals are very good. The brand is clearly trying to reposition itself in the market using its heritage from the past that worked very well. They are relaunching products/styles that were very successful in the past.” . “Nobody talked about Calvin Klein other than about their underwear lines in the last few years. It is clear that people in the industry have started to talk more about the Calvin Klein brand, like on Instagram, fashion blogs Calvin Klein will be able to mentioning their T-shirts and sweaters lately and their new collections.” increase their sales in 2015, . “Calvin Klein was suffering from a relatively low presence at a retail level in because they are coming from Germany, and it is seen at more retail multibrand shops now, though it is a very low base in 2014 and still distributed more timidly than Tommy Hilfiger.” . “Calvin Klein will benefit from having PVH behind it; it is a very well- are investing more in respected company in Germany that distributors happily work with. Calvin advertising, a wider distribution Klein is better managed by PVH than by Warnaco.” gradually, and the launch of Calvin Klein some vintage lines that are . “Calvin Klein will be able to increase their sales in 2015, because they are likely to work well. However, coming from a very low base in 2014 and are investing more in advertising, a wider distribution gradually, and the launch of some vintage lines that are competition is tough in likely to work well. However, competition is tough in Germany. People do not Germany. People do not relate relate Calvin Klein to jeans at all, and this hasn’t really changed. It will with Calvin Klein to jeans at all, and the help of more communication, but this will take a long time.” this hasn’t really changed. It . “Calvin Klein is not only competing with other brands such as Diesel but will with the help of more also with retail fashion chains that are becoming more and more prominent in the fashion sector, such as H&M and Zara. These brands offer a wide communication, but this will range of products for all tastes, from very chic and classy to more wacky and take a long time. totally trendy … at very affordable prices compared to Calvin Klein prices.” Editor, Fashion Publication . “More than any other upmarket brand, Calvin Klein’s biggest challenge in Germany terms of competition are those retail chains in Germany.” . “I don’t see prices of Calvin Klein an issue. They are retailed at higher prices than in the U.S., but the problem lies not in prices but in consumer perception of the brand.” . “Their styles are slowly improving. They are a bit too austere for everybody, but I think their clear, clean cuts work well.” . “The quality of their denim stuff has improved, which will help them, but they still have to make their styles a bit more innovative and a bit more fun.” . “Calvin Klein needs to be more widely distributed in Germany; it still has a low presence here. You cannot find it at many stores. With the help of PVH behind it, it is likely to continue to expand its retail distribution in this country, but this will take awhile.”
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
. “Their ad campaign featuring Justin Bieber gives the brand a lot of prominence, but he appeals to teenagers and does not present a very good image in Germany in some segments.” . “Brands that have taken share from Calvin Klein in the recent past have been Nudie [Jeans Co.] and [H&M’s] Cheap Monday because they are more widely distributed, have a good image and are priced very reasonably. They stand exactly between Zara and H&M prices and the more upmarket prices of Calvin Klein and Diesel.” . “Many retail chains in this country have a great relationship with PVH and have seen how well they have managed Tommy Hilfiger. This will make some retailers purchase more Calvin Klein.” Tommy Hilfiger . “Tommy Hilfiger is a much more established brand in Germany with a much wider retail distribution at upmarket stores, including department stores and multibrand fashion retailers in upmarket locations in Germany.” . “Demand for Tommy Hilfiger is likely to remain strong in 2015, which will also be helped by its new collections, which I think are quite attractive. They have kept their traditional American chic style but are trying to combine it with a sportswear look.” . “Even though people do not relate it so much to jeans, they relate it to normal apparel. Sales are helped by their good image they convey, their excellent advertising campaigns and the styles, which are classical chic and works very well here. It is also a very aspirational brand.” . “Their pricing is correct. They are positioned upmarket, and people are prepared to spend that much on Hilfiger items.” . “Both Tommy Hilfiger and Calvin Klein will be helped by a resurgence in denim and casualwear. Last year, jeans seemed to be replaced by tracksuit trousers in the streets used as casual wear, especially by men, but I believe demand for jeans is back.”
3) Fashion editor covering denim in Germany; repeat source Calvin Klein sales are likely to either hold or increase slightly year to year with the help of a greater support in advertising and much better management. Sales also should benefit from easy comps. Strategies are likely to begin paying off in the next few months. Tommy Hilfiger is a much stronger brand with a wider distribution and very stable demand in Germany. May 19, 2014: PVH’s strategy to improve and enhance the Calvin Klein denim line would start to have a real effect in the midterm. PVH had managed Tommy Hilfiger very well in the German market and was likely to apply similar strategies to Calvin Klein. The brand’s business in Germany had been limited during the last five years, so any efforts to promote it would have an effect. However, the market had become increasingly competitive with a proliferation of brands. Calvin Klein needed to make its styles more innovative rather than classic. PVH Strategy . “PVH has got the resources to revamp the brand. They have great PVH has got the resources to communication and definitely the know-how to improve things. The problem revamp the brand. They have has been that this is the theory, but in practical terms, according to the buyers and distributors that we have spoken to, they haven’t managed to great communication and achieve their objectives in terms of sales and demand.” definitely the know-how to . “They want to position their two main brands very clearly, with Tommy being improve things. The problem the preppy brand and Calvin Klein a clean urban look, which again looks has been that this is the theory, good on the paper but they are not quite there yet.” but in practical terms, . “It is not that consumers are not open to new products; it is just that the Calvin Klein product is not that convincing. … Having seen their collections in according to the buyers and the last nine months, I think that they are just a bit boring.” distributors that we have . “Since the purchase of Calvin Klein by PVH, distribution of its Calvin Klein spoken to, they haven’t brand in Germany hasn’t changed. However, it is clear they want things to managed to achieve their start happening. They have invested more heavily on their showroom in Düsseldorf, enlarging it and investing more in marketing. They are making it objectives in terms of sales and more interesting and attractive for buyers, making it more commercial and demand. marketing-oriented.” Fashion Editor Covering Denim Germany
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
. “Calvin Klein is definitely weaker than Tommy Hilfiger in Germany at the moment. Calvin Klein is still a very well- known brand, but they need to do more to revamp it. It is not quite there where they want to bring it. It is not seen as a fashion brand but just an underwear brand.” . “I guess they are the growing pains of a brand being under the umbrella of another company. Tommy Hilfiger continues to be a very strong brand, but with the change they have suffered in terms of deliveries as up until a few months ago, the company in charge of their tailoring was a Swiss-based group, Holy Fashion Group. PVH has now retrieved the license for the tailoring/making of their formalwear, which has resulted in some delivery delays.” Calvin Klein . “The image of the Calvin Klein brand is still positive or at least neutral to positive. The lack of consumer awareness of its denim line is not going to change overnight. They have to improve the product to make it less boring. They also need to address some delivery problems that have happened recently, and increase their presence at a retail level. One of the reasons why the brand weakened is because their presence in the retail distribution channel has been very limited in the last few years, and all the advertising they have done has been focused on their underwear lines.” . “Anything they do to the brand will be fantastic because it had been neglected for a few years until PVH came along.” . “I don’t think it will be difficult for Calvin Klein to grow with such easy comparables, as they were doing so badly before.” . “Orders are better than actual sales in Germany because PVH is a very well-respected company. It is a very big company that has the power to put some pressure on buyers. But at the end of the day collections have to be sold, and customers just don’t recognize it. They are not that aware that Calvin Klein in back on the floor.” . “With the Calvin Klein brand, you have to distinguish the denim division and the suit division. I don’t think that many people relate Calvin Klein with denim in Germany. However, I believe that the Calvin Klein suit division has got more potential, and I believe they are better positioned [than its denim line] to succeed.” . “One of the problems with Calvin Klein’s denim brand is their pricing, which is not very clearly positioned. German buyers tend to be very polarized in terms of pricing for some reason. They either tend to buy the cheaper and more affordable brands or the expensive ones that give a message of exclusivity to consumers, leaving the Calvin Klein brand a bit in between.” . “PVH is trying to bring the suit line to the level of the Hugo suit brand, which is slightly more affordable than Hugo Boss. I think that they have more The guys at one of the industry potential, but they are not quite there yet. [Calvin Klein’s] suits are stylish associations told me that some and urban, but they are lacking in details. It would be great if they had more buyers have bought some colorful linings, trimming or stitching. … The improvements in their styles haven’t been enough to make customers buy them as much as PVH and Calvin Klein stuff only because buyers wished.” PVH and Tommy Hilfiger are Tommy Hilfiger behind it, giving them a vote of . “Tommy Hilfiger is a much more important and stronger brand than Calvin confidence just because of Klein in apparel. It is regarded as a fashion brand, which Calvin Klein is not that. outside of underwear. Hilfiger is also much more widely distributed. It is a very well-looked-after brand that has received lots of support from PVH.” Fashion Editor Covering Denim . “It is a very well-established brand that continues to enjoy healthy demand Germany thanks to its styles and chic image of American preppy. … It is very aspirational. Their advertising campaign last year was a success in Germany.” . “Potential buyers know this and are now more willing to buy Calvin Klein lines with PVH and Tommy Hilfiger behind. Calvin Klein is definitely going to benefit from PVH’s synergies.” . “The guys at one of the industry associations told me that some buyers have bought some Calvin Klein stuff only because PVH and Tommy Hilfiger are behind it, giving them a vote of confidence just because of that.” . “They have had some bumps in the last few months when their tailoring changed hands and they started doing it themselves, causing some delivery problems.”
4) Italian journalist for a European magazine specializing in casualwear and denim Calvin Klein sales so far in 2015 have been down in Italy and are likely to continue to be sluggish for the year. This is due to tepid demand for apparel and denim in general, very strong competition from more affordable brands, as well as the
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
uncertain economic situation. Calvin Klein is regarded as too boring and pricey despite it attempts to improve its collections. Calvin Klein’s focus on younger consumers is good, though the jeans may be out of these shoppers’ price range. Competitors like H&M and Zara are fun and more affordable. PVH’s management of Tommy Hilfiger is a positive. Tommy Hilfiger is an established brand, very widely distributed and with very attractive collections. The brand has had sluggish sales because of the general economic malaise, but it is strong enough to see growth this year. PVH Strategy . “PVH’s strategy in Italy seems to be focusing on expanding standalone stores and advertising concentrating more on the younger generations.” . “I see two concerning factors for growth in this country: PVH is trying to Denim stuff is not selling that focus and attract the younger consumers, but their lines are not that well this year or in the last few appealing to them. This target group has a lot of other options, including months. It seems like it is going denim by H&M, Zara, Mango, etc. that retail at more affordable prices. … through a low in Italy. Secondly, PVH is focusing on opening lots of own-brand stores by Calvin Klein, and it is too soon for this to have a positive impact on sales.” Italian Journalist, European Casualwear . “Calvin Klein continues to enjoy a high brand-status image in Italy, so PVH & Denim Magazine doesn’t need to bring it to a higher status. However, I am not sure people are prepared to spend so much on such basic styles.” . “I don’t think PVH should increase Calvin Klein prices; they should focus on launching more innovative collections.” . “We talk with associations representing buyers and stores and people in the industry, and what they are telling me is that denim stuff is not selling that well this year or in the last few months. It seems like it is going through a low in Italy. Younger people are going for tracksuit type of trousers with a trendier look as casualwear.” . “However, there are some brands in the denim sectors that … are outperforming and doing very well, such as Ralph Lauren [Corp./RL and] Scarti- Lab, an Italian brand with very good quality at more affordable prices than Calvin Klein and Tommy Hilfiger.” . “It is not that I am pessimistic about PVH’s strategy in Italy; I think it is the right one, but they need to address more things, especially their collections, and can’t forget that consumer confidence hasn’t really come back yet. It is a bit too soon for the spring People are still very price-sensitive, and denim, especially jeans, is not that collection; it will be extensively popular at the moment.” introduced in March. … I Calvin Klein haven’t seen their fall “Calvin Klein sales have been sluggish in the last few months despite easy . collection yet; I know they are comps over the previous year. Although Calvin Klein has improved their quality in the last year, their styles are still not very innovative. They had a trying to improve styles, so I am problem in the past, positioned as a premium brand but with styles that had hoping it will be more fun than a cheapish look because they were too simple and clean for the Italian’s what they have now. taste. They seem to have tackled that, but their styles are still not that trendy.” Italian Journalist, European Casualwear . “They started improving quality and styles around six months ago. Now their & Denim Magazine collections are more colorful; they have introduced better materials with a better finishing and trimmings. They are now introducing gray denim, coated denim, more skinny denims, but this takes awhile for consumers to react.” . “Buyers are not reordering much because of sluggish buying patterns in general and strong competition from other brands. For some shops, Calvin Klein performed a bit worse than expected. I know that they have introduced discounts to deal with high inventory.” . “It is a bit too soon for the spring collection; it will be extensively introduced in March.” . “I haven’t seen their fall collection yet; I know they are trying to improve styles, so I am hoping it will be more fun than what they have now.” . “With regards to the lingerie lines, they are struggling with most of the stores we spoke to as they are receiving lots of competition from private-label brands from fashion retail chains, such as Zara, Intimissimi and Mango, among others, offering very trendy, innovative and changing styles with a high turnaround at more affordable prices.” Tommy Hilfiger . “Tommy Hilfiger is a stronger brand than Calvin Klein in Italy. They have an interesting product, with the U.S. image, better quality than Calvin Klein, and a wider range of products.”
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
. “Even though it is a premium brand and its prices are set accordingly, people are prepared to spend that extra money on their lines.” . “This preppy, modern, classic style works very well. Although it is an American brand … their styles are also very European or very much in line with our taste; the same cannot be said about Calvin Klein.” . “It is a very well-distributed brand, seen as a relatively affordable luxury brand, retailed at upmarket locations or through upmarket retailers. All shopping malls, upmarket department stores and multibrand shops have it.” . “If it difficult to say whether Tommy Hilfiger will increase sales or not. I know that sales in general had struggled due to the unseasonal weather and less spending on apparel, but they are in a better position to succeed than Calvin Klein as it stands now.”
5) Fashion consultant specializing in denim, United Kingdom; repeat source PVH’s strategies with Calvin Klein in the United Kingdom are too new to assess, but its backing has given buyers more confidence in the brand. Calvin Klein lost share in the United Kingdom because of its arbitrary distribution strategy, which included heavy discounting. PVH’s main challenge now is trying to persuade those upmarket retailers to carry it again. Calvin Klein is likely to see sales increases based on easy comps. Tommy Hilfiger is very well established in the United Kingdom and likely will maintain or grow sales this year. May 19, 2014: It was too soon to see the real effects of PVH’s Calvin Klein purchase, but it would become apparent in the midterm. PVH was focusing on Calvin Klein denim distribution and on more premium points-of-sale and closing the lower-end or more mass-market POS. Retailers positioned further upmarket did not want to stock Calvin Klein jeans if they were being sold at mass-market outlets for less. The brand’s styling needed to become more innovative. PVH Strategy . “It is still very difficult for us to assess PVH strategies with Calvin Klein in this country. They have a long way to go. It is positive that PVH is behind The good thing is that nobody them now as they will look after the brand much better than Warnaco, and PVH is a well-respected company in the UK.” in the industry really talked . “Buyers in the UK know that Calvin Klein is now owned by PVH, so they will about Calvin Klein a few have some confidence in it as they have made a lot of money from Tommy months ago, and people talk Hilfiger. But this will take a long time until it translates into growth for the more about the brand now. company.” . “Before spending a lot of money on marketing, they have to put their Fashion Consultant Specializing distribution channels in place, which they are tackling at the moment.” Denim, United Kingdom . “The problem with Calvin Klein for a few years is that it was being distributed everywhere, including discount stores, which cheapened the brand image a lot. As a result, even though Calvin Klein wanted to remain as a premium brand, many more upmarket retailers refused to carry it.” . “PVH’s present challenge is to clean the brand image by persuading all those department stores and more upmarket retailers to carry their brand again. The positive thing for Calvin Klein again is that PVH is behind, but if consumers have been getting Calvin Klein stuff at cheaper prices, this is not going to be that easy.” . “The major route for Calvin Klein’s growth in the UK will be through partnerships with major department stores like Harrods, Selfridges and Fenwick. Selling via independent boutiques is time-consuming and not overly profitable. I could expect it to open its own stores selectively in and around London and possibly in major cities like Leeds, Manchester and Glasgow. It is likely also to partner with significant online players like Shop Direct.” . “I don’t know if they have started partnering with department stores, but I think they are already in talks and testing the market seriously for that.” Calvin Klein . “It is difficult to say whether Calvin Klein will increase sales in 2015, but they are coming from such a low base.” . “Calvin Klein has high brand recognition although mainly due to underwear and fragrance. Consumers don’t relate it to denim here.” . “Competition is another challenge. The market is saturated at the moment. They also need to improve their distribution channels, but this is more of a medium to long-term thing.”
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
. “Collections have improved in quality and we can see they are making efforts, but they need to tackle the distribution issue first if they want to have long-term growth.” . “They also need to make their collections a bit more exciting, but I don’t see a real problem there short-term.” . “The good thing is that nobody in the industry really talked about Calvin Klein a few months ago, and people talk more about the brand now.” Tommy Hilfiger . “In the UK, Tommy Hilfiger is quite a mature brand. Its recent growth has come from opening its own stores close to London. I do not see it changing this strategy although it might increase its sales online.” . “They are well set to at least remain the same or even grow in 2015. Competition is tough, but they have lots of consumer loyalty.”
6) Fashion expert in denim and foreign brands in France; repeat source The effects of PVH’s strategies with Calvin Klein will not take place immediately. Bringing the brand back to its former status will be difficult, but hints of progress are surfacing. Heavier ad spending still has not affected demand for Calvin Klein denim lines. Both Calvin Klein and Tommy Hilfiger have been hit by a weak period for denim and apparel in general, although Calvin Klein to a greater extent. Tommy Hilfiger is well positioned to record sales growth overall in 2015. Calvin Klein likely will not post higher sales this year despite easy comps. Sept. 25, 2014: Consistent with his comments from May, this source did not think PVH’s acquisition of Warnaco would have a real effect in the near future or midterm. Calvin Klein had made some changes, but returning to its former status would be difficult. That the same company that manages Tommy Hilfiger now was at the helm of Calvin Klein was a positive. The ad campaign had not swayed consumer demand for Calvin Klein denim. May 19, 2014: This source did not think that PVH’s Warnaco acquisition would have much of an effect for Calvin Klein at first. Bringing back the brand would be very hard. The synergies between Tommy Hilfiger and Calvin Klein would help with distribution, but the influence on purchasing decisions remained unknown. The same people would work with both brands, which could enhance Calvin Klein’s image in France. PVH Strategy . “It is very soon to assess PVH strategy; they are still at an infant stage. Nothing new has happened since the last time we spoke.” . “I haven’t seen any changes with Calvin Klein since the last time we spoke. It is too soon to assess the real impact of PVH managing Calvin Klein in France. We need to wait a bit. Also, this hasn’t been the best time for any brand to be turned around.” . “It is going to be a long-term thing.” Calvin Klein . “Demand for jeans in France since September has been very weak due to warm weather, a sluggish economic environment, the negative political situation with the terrorist attacks in Paris in January resulting in a very poor buying mood. All denim brands have been hit but especially those that were already weak, like Calvin Klein.” . “This hasn’t been a great time for Calvin Klein. Sales for Calvin Klein brand have gone down so far.” . “Calvin Klein is not regarded as a denim brand. To put a brand in the denim market, to make it a reference brand for consumers is a difficult task that doesn’t happen quickly.” . “One hindering factor for Calvin Klein at the moment is also their collections and their prices [which are] a bit too high for what they are offering.” . “If someone wants to spend over €100 on a pair of jeans, they go for something more daring and fun in style or something that they think is offering them added value, which is not Calvin Klein.” . “Their jeans and T-shirts are not as trendy; they are a bit too American in style for France. Although they are improving in styles and quality, they are too pricey for what they are offering, which is nothing special.” . “There are other brands that in spite of all those hampering factors of a bad weather and a very sluggish buying mood have done very well, such as the Japanese Uniqlo [owned by Fast Retailing Co. Ltd./TYO:9983], with very good styles and great advertising.” Tommy Hilfiger
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
. “Hilfiger is a much better established brand, but like most brands, I believe it has also been hit by unseasonal weather since September and the unstable buying mood, as well as the terrorist attacks.” . “Tommy Hilfiger is likely to have a good performance in 2015 due to the strength of its collections and its very good advertising campaigns.”
3) U.S. Supply Chain These four sources expressed concern for PVH’s ability to deliver strong results with its Calvin Klein and Tommy Hilfiger brands in 2015. PVH is emphasizing margins and has opted for lower-quality materials to grow its bottom line, making it more difficult for Calvin Klein to achieve sales goals or move to a higher-end product category. Two sources said customer demand for denim is slowing as younger consumers embrace alternative materials. One source is less optimistic about PVH and Calvin Klein than in September, forecasting a decline in denim reorders and lower-than-expected sales this year. One source’s business with Tommy Hilfiger is off 25%, echoed by other suppliers. The source also said Hilfiger’s spring product was off to a slow start. No source had insight into Calvin Klein’s spring product line.
Key Silo Findings PVH Strategy - 2 of 4 sources said U.S. demand for denim is on the decline as younger consumers seek out alternative materials. - 1 said PVH is focusing on margins and not picking quality materials, making it more difficult to increase sales. o As a result, the source is less optimistic than in prior interviews regarding PVH and Calvin Klein. - 1 said PVH will have a difficult time if it tries to move to a higher-end product for either Calvin Klein or Tommy Hilfiger. - 1 supplier of yarn primarily for use in underwear reported overall enthusiasm about retail in 2015 and 2016 and believes PVH stands a chance to see a sales increase. - 1 had preliminary discussions with PVH about supplying yarn for its products, but talks have not progressed. Calvin Klein - 1 said Calvin Klein is choosing cheaper fabrics and is struggling with sales other than the $20 offerings at Costco Wholesale Corp. (COST). As a result, denim reorder volume will decline in 2015 and will be below expectations. - 1 said sales will decrease as kids are not wearing denim as much. - 1 could not comment on the spring product line as it only recently shipped. Tommy Hilfiger - 1 said business with Hilfiger is down 25% while others’ orders with Hilfiger also declined in the 20% range. o Sales of Hilfiger are down year to year and the spring product is off to a slow start. - 1 noted Hilfiger is rumored to be trying to expand to department stores beyond Macy’s as the contract is reportedly up for renewal. Still, this source said Hilfiger was not present at the MAGIC industry show. - 1 said Hilfiger is having problems and attempting to redirect the brand as a result.
1) Senior sales and product manager for a North American denim and fabric manufacturer; repeat source This source is less optimistic about the Calvin Klein and Tommy Hilfiger brands, especially in denim, compared with in May and September last year. The overall denim market continues to see sales slip, especially at lower price points. Same-store sales for Calvin Klein and Tommy Hilfiger will not increase significantly unless PVH buys better-quality denim fabric. He indicated in September that he was in talks with PVH to improve orders, sales and quality, but has done no business with PVH/Calvin Klein for the current season. Denim orders from Tommy Hilfiger have tumbled 25% year to year, and the brand’s denim orders from other suppliers in North America are down more than 20%. He has heard that Hilfiger sales at the retail level are off slightly as well. Sept. 25, 2014: Calvin Klein had, within the prior two weeks, signed contracts with two North American garment producers with facilities in Mexico, including Hampshire Group Ltd. subsidiary Rio Garment S.A. and Border Apparel. Both producers are known for making lower-grade, lower-priced jeans and knits. This source had met regularly with Calvin
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
Klein, but the company had only ordered lower-end denim. Still, she viewed Calvin Klein’s new contracts with Northern Hemisphere producers as a good It is challenging in this sign for the domestic denim market. economy to increase same May 19, 2014: Calvin Klein had the brand recognition, in-house design talent store sales because there has and marketing know-how to improve the status of Calvin Klein Jeans, but upper- been a downturn in denim level managers had yet to give the go-ahead and were unwilling to pay for higher-priced fabric, design and fit to enter the premium denim category. Calvin sales. With better product it is Klein had been shopping for a denim manufacturer in the Northern Hemisphere, achievable. But [PVH] have suggesting that PVH was moving forward with the strategy it proposed in 2013. been purchasing more off- Still, plans had not been implemented, and Calvin Klein was far from having a show, low-cost goods to product to sell in department stores. Reducing distribution in Costco and the like improve margin, and that is was less important than creating a premium jean line to rebuild the brand. compromising the product. PVH Strategy . “It is challenging in this economy to increase same store sales because Senior Sales & Product Manager there has been a downturn in denim sales. With better product it is North American Denim & Fabric Manufacturer achievable. But [PVH] have been purchasing more off-show, low-cost goods to improve margin, and that is compromising the product.” . “I don’t have a ton of new information to share with you since [September], and I don’t know how their current strategy is progressing.” . “I am less optimistic about the PVH brands, but I hope I’m wrong.” . “It cannot bring Calvin Klein jeans back to a higher brand status unless they change the denim fabric. They are buying cheap denim that does nothing for the brand.” . “If they move into better-quality denim, they could charge higher prices and not sacrifice margin while gaining sales. That’s not what I’m seeing.” Calvin Klein . “We are not doing anything with Calvin Klein as they have chosen to use very cheap [denim] to hit margin. We have talked to them in the recent past, Our business with Tommy but we couldn’t compete on price with those using cheap goods, and we Hilfiger is way off this year, really wouldn’t want to. I have heard that Calvin Klein is still struggling except in the $20 jeans sold at BJ’s [Wholesale Club Inc.] and Costco, in the down by about 25%, and they discount area. We just don’t compete in that market.” are not showing any . “I don’t have information on sales of Calvin Klein jeans [at retail], and Calvin improvement for their denim Klein underwear is not my area.” products in the near term. This “My understanding is that Calvin Klein denim reorder volumes for the fall of . seems to be the narrative for 2015 are off year over year.” . “Everyone is very optimistic on sales for [Calvin Klein’s] fall lines, but we most denim brands. … I’ve have not seen this trickle down to volumes at this point. We are in our heard the spring product is largest shipping season and seeing very little increase.” slow. . “Compared to expectations, orders are flat to slightly down.” . “I have not heard anything about how the spring product lines [for Calvin Senior Sales & Product Manager Klein] are doing.” North American Denim & Fabric Manufacturer . “I have no information whether they are succeeding with improved manufacturing or logistics.” Tommy Hilfiger . “Our business with Tommy Hilfiger is way off this year, down by about 25%, and they are not showing any improvement for their denim products in the near term. This seems to be the narrative for most denim brands.” . “I’ve heard that their sales are off and slightly down from a year ago.” . “Year over year, Tommy’s reorder volumes [from other suppliers] are off for the fall 2015 season. I am hearing they are off by about 20%-plus.” . “I’ve heard the spring product is slow.”
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
2) Sales manager for a supplier of licensed PVH men’s apparel to specialty retailers PVH faces challenges for upgrading the U.S. brand status of Calvin Klein jeans, in part because denim jean sales are off industrywide and denim’s popularity is in decline among young consumers. PVH also will have a difficult time expanding the U.S. distribution of Tommy Hilfiger beyond Macy’s because the brand’s long, exclusive contract and association with Macy’s makes the brand undesirable to other department stores and specialty retailers. PVH Strategy . “I don’t know if they can take Calvin Klein jeans to a higher premium level. There are a lot of different brands at the midrange to high-end right now, and North American kids are not wearing jeans as much as before.” . “I have heard that Tommy Hilfiger, which has been strictly licensed to Macy’s, is trying to move the brand out to other department stores. Until now Tommy Hilfiger has contracted exclusively with Macy’s, but that contract is up for renewal. They are trying to move the brand out, but I think they will have a hard time.” . “Macy’s promotes its brands so much that I’m not sure the specialty retailers or department stores would even want a Calvin Klein or Tommy Hilfiger on the floor. Both are strongly associated with Macy’s.” . “If PVH wants to move Calvin Klein and Tommy Hilfiger to the premium level, they not only have to get out of the discount retailers, they should not even sell the products in Macy’s. Plus, on the denim side, there are already so many premium brands that have been at both department and specialty retailers for such a long time.” Calvin Klein . “Calvin Klein continues to have strong brand-name recognition, but kids are not interested in wearing jeans or denim right now so I believe sales will suffer and they will have a tough time bringing it back. That is true now for the entire denim market.” . “Kids in North America are now more into dressy sweatpants made of heavier materials and with patterns. We see a lot of twill and canvas, but denim is down across the board. I would imagine Calvin Klein denim jean sales and orders also are down.” . “I have not heard anything about Calvin Klein’s new spring lines. I was just at the MAGIC show last week, and everyone’s spring lines have just started to ship. Most brands started first shipments on Jan. 25, so no one has seen the lines yet, whether it’s Calvin Klein or others.” Tommy Hilfiger . “It will be very tough for Tommy Hilfiger to move outside and beyond Macy’s. They were not present at the MAGIC show last week, which suggests to me that they may not be serious about getting away from an exclusive deal with Macy’s.” . “From what I’ve heard, Tommy’s contract with Macy’s is up for renewal. They are not trying to get out of Macy’s completely but rather to expand distribution beyond Macy’s to other department stores. But getting into other department stores, especially stores like Nordstrom [Inc./JWN], is going to be a tough sell. Any brand that has had a long, exclusive relationship with Macy’s would have a difficult time, not just Tommy.” . “Tommy Hilfiger is not doing well in Macy’s. At the same time, we see Macy’s struggling as a whole in the men’s market. How Tommy does with sales depends on whether Macy’s is doing well, and they are not doing especially well right now.”
3) Executive with a global supplier of specialty yarns used in brand clothing, especially underwear; repeat source This source had little new information about PVH’s progress for implementing strategies or about the status of sales and orders for Calvin Klein and Tommy Hilfiger. He believes PVH can increase same-store sales, and added that that industry suppliers and manufacturers are optimistic about seeing improvements for the overall industry in 2015 and 2016. He continues to hear that PVH is working on plans to improve the status of Tommy Hilfiger in the United States, but has not yet seen changes or the implementation of plans. Sept. 25, 2014: PVH had indicated it would keep 70% of its production in Asia and move 30% of its production to North America. The source believed that shift was in progress, as yarn orders were up dramatically and suppliers attributed the uptick to renewed North American production. He could not tie order increases to Calvin Klein per se, but said business was swift, resulting in backlogged orders and deliveries that were three to four times longer than normal. His company was in the midst of increasing capacity by 10% to 12% to accommodate the boost in orders, which were likely to increase
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
over the next 12 months. This source could not speak to the denim business, which was sluggish overall, but said the underwear market was in transition as brands reinvent fabric mix, blends and colors. Calvin Klein remained a strong underwear brand in department stores, but its prices were on par with Jockey, typically a less-expensive brand. Either Calvin Klein had dropped its price to remain competitive in department stores, or Jockey had upped its price to differentiate the underwear line it makes for Walmart Stores Inc. (WMT), sold under a different name. PVH Strategy . “I do not know why they wouldn’t be able to increase same-store sales.” . “Overall people are optimistic about sales and orders for both 2015 and 2016, but the enthusiasm is about improvements for retail in general, rather than for PVH or its brands.” Calvin Klein . “We do business indirectly with Calvin Klein. We meet with PVH, and we sell specialty yarns to vendors who make fabrics for Calvin Klein. We used to do more for Calvin Klein.” . “We are not directly in the denim market, which is extremely slow right now. We do have yarns that go into both T- shirts and jeans, but we supply our yarns to companies that make garments for the brands. As a result we do not know how they divide the volumes or distribute the orders, but our supplies are stable year over year.” Tommy Hilfiger . “Tommy Hilfiger has had problems, but my understanding is that they are trying to redirect the brand. The question is, did Tommy Hilfiger lose the original customer base they had before they went urban, and can they get them back? I cannot predict at this point. We hear they are making a big push, but I have not seen any changes.”
4) Director of sales for a specialty yarn manufacturer based in the United States PVH continues to meet with U.S. yarn and fabric suppliers, telling vendors it intends to bring more production back to North America. The source met with PVH within the last six months to discuss supplying yarn for knit shirts, but did not cut a deal. PVH Strategy . “I know that PVH is looking at bringing production back to the U.S., but they aren’t working with us. We did meet with them in the past six months to have a generic conversation about supplying product for knit golf-type shirts. They are definitely looking to do it and maybe they are buying a ton of fabric from someone, but I still have heard nothing and they aren’t buying from us.” . “When we met with them, it was a general conversation about supply but not for any specific brand.” Calvin Klein . N/A Tommy Hilfiger . N/A
4) U.S. Industry Specialists Both sources said PVH could grow in 2015 if it makes the right choices. One source is more optimistic about PVH than when interviewed in September, and believes growth will come if PVH spends money to bring attention to its brands. The other source believes PVH’s opportunity lies in Asia, where Calvin Klein and Tommy Hilfiger are considered premium, and lauds the company for pulling back on its distribution to low-priced discount stores like Costco. The first source said PVH could grow in the mid-single digits and peak during back-to-school season. Both sources also said PVH is emphasizing its bottom line instead of top-line growth, as in the past. Calvin Klein will only show incremental improvements this year. One source suggested the brand look into featuring its products in outlet stores for potential $150 million to $200 million revenue. Tommy Hilfiger is considered more of a private-label brand for Macy’s in the United States, but is succeeding in Europe where it is a premium brand. Neither source said anything specific about the spring collection.
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
Key Silo Findings PVH Strategy - 2 of 2 sources said PVH can grow in 2015. o 1 said it will need to spend the money to attract customers, but could grow mid-single digits and enjoy a peak during back-to-school season. o 1 said its opportunity lies in Asia where it is more of a premium brand. - 2 said PVH is making a profit and has emphasized its bottom line over top-line growth. - 1 is more optimistic about PVH’s prospects than in the September 2014 interview. - 1 said PVH is smart to pull back from off-price stores like Costco, cleaning up distribution and controlling its releases. Calvin Klein - 1 said Calvin Klein will show incremental improvements but nothing that will significantly move the needle. o No denim customer asks for Calvin Klein. - 1 said Calvin Klein has an opportunity in the U.S. outlet store space and could bring in $150 million to $200 million in new revenue. Tommy Hilfiger - Both sources said Hilfiger is not impressing the U.S. market. o 1 said it is deteriorating and PVH is not happy with its performance. o 1 said it has, in essence, become a Macy’s private-label brand. - Hilfiger is viewed as more of a premium and prestigious brand in Europe.
1) Founder and senior analyst with a consulting firm serving men’s wear and women’s wear retailers; repeat source Overall, PVH is doing well, and the source expects single-digit growth for the company this year. PVH has the ability to improve same-store sales for Calvin Klein jeans, although the brand will mirror the growth of Macy’s, which has been flat to up slightly. Elevating Calvin Klein is achievable, but it is an incremental process that depends on the deals PVH cuts with Macy’s. Improvements should be visible by back-to-school season. Tommy Hilfiger continues to struggle and deteriorate in the United States. Sept. 25, 2014: This source had seen no change in business related to the PVH strategy to bolster Calvin Klein jeans and underwear. The PVH/Calvin Klein initiative to expand Calvin Klein’s presence in department stores should be successful if PVH can increase square footage, secure strong floor placement and focus on Calvin Klein’s overall look. PVH was known for its ability to cut good deals for retail placement, and Calvin Klein’s dressier, clean style fit well with the current trend in young men’s fashion. The men’s market would stay flat for another six to eight months. May 19, 2014: This source doubted PVH’s ability to revive and upgrade Calvin PVH’s business [in the United Klein denim in the United States, but said the brand was gaining momentum in States] in general will go where Europe. Calvin Klein denim likely was losing share to private-label brands in Macy’s business goes. Macy’s discount stores. It also faced numerous obstacles that might preclude entry into higher-level department stores, already saturated with similarly priced jeans in a business has been flat to a sluggish denim market. Meanwhile, Calvin Klein underwear dominated the U.S. little bit better than last year. and overseas markets. That means PVH’s business will PVH Strategy be flat to a little bit better than . “They can improve and increase same-store sales for the brands if they last year. I think we can expect want to. … It’s just a matter of cost and whether you have the money and mid-single digit growth for PVH. will to do it.” I don’t think they will see . “I have heard is that PVH seems to be making a profit and moving forward. I double-digit growth, but it will have one client who is a PVH licensee [not for Calvin Klein/Tommy Hilfiger labels], and business is good for him.” probably be in the 4% to 7% . “PVH is doing fine and generally does a good job of promoting its brands. I range for 2015. am slightly more optimistic than when we last spoke. The [PVH] business Founder & Senior Analyst appears to be building, and we expect 2015 to be a good year for retail Clothing Retailers Consulting Firm overall. The economy has improved, consumers are starting to spend more
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
… and we are not heading into a political election year, which generally diverts attention and scares consumers. We have had some bad weather, but that was true this time last year. There is nothing out there in general that says [PVH] is not going to do a good business.” . “PVH’s business [in the United States] in general will go where Macy’s business goes. Macy’s business has been flat to a little bit better than last year. That means PVH’s business will be flat to a little bit better than last year. I think we can expect mid-single digit growth for PVH. I don’t think they will see double-digit growth, but it will probably be in the 4% to 7% range for 2015.” . “I think [PVH] can bring Calvin Klein above where it is now. They just have to divide their market share and make a deal with Macy’s on margin. This is a simple thing to do; they just need the willingness and wherewithal to buy the market share from Macy’s or Nordstrom. They’ve already got the biggest part of the Calvin Klein brand in Macy’s, and that is the underwear line. They still have to make sure they continue to innovate.” . “They will still have to sell in stores at whatever the going price is for their category. If $79 is where the market is for their sector, they are going to have to sell at or around $79. They are not going to get a premium over competitors in their category.” . “Most [customers] who go in to buy a pair of jeans are not buying for the brand, per se. They are looking for the right fit and cut. There are several price point categories; there are $69 to $75 jeans, $116 to $120 jeans and $149 to $175 jeans. Whatever price the retailer puts them in is where they have to be.” . “Macy’s sets the price point in this part of the business. Generally Macy’s buys the license, builds the product and manufactures it to fit in with the segment. Most of the brands do it this way. I can’t say for sure if that’s the case with Calvin Klein, but that’s the norm.” . “The peak [for potential turnaround] is back-to-school. So if PVH and Calvin Klein talk to Macy’s about a new launch for the season, that garment is already a done deal, in manufacture, and in the pipeline for shipping for back-to- school.” Calvin Klein . “They are making incremental improvements all the time, just as we do in our business. You might pick out one little thing to improve a bunch and then pick out another little thing to improve a bunch. Occasionally all of these little things can turn into a big improvement, but you are much more likely to see little incremental improvements rather than a big move in the needle.” . “I am not as familiar with underwear. The general rule with underwear is if overall growth in men’s retail is up 3%, then Calvin Klein men’s underwear will be up 3%.” . “Nobody walks into a department store and asks for the new Calvin Klein jeans. They did in 1975 when Brooke [Shields] was up on the billboards. They are not going to set new trends, which are typically generated by the big designers. There’s a lot of beautiful merchandise out there right now, but there is nothing new or much different from what consumers have in their closets. It’s hard to be enthusiastic. If we saw some innovation going on out there, the retail brands could explode because the demand is there. We just don’t see it.” Tommy Hilfiger . “Things continue to deteriorate with the Tommy Hilfiger brand. I have read and recently heard they have plans to revamp the brand, but I have not seen anything change. I just know they have talked about plans. PVH is not happy with Tommy Hilfiger’s performance.”
2) Lead executive for a global retail consultancy Calvin Klein’s opportunity in the United States is in the outlet channel, where the brand’s 70 stores, if doubled, could represent a $150 million to $200 million opportunity for new, untapped growth. PVH already has cut volumes at Costco, BJ’s and other off-price venues, while establishing new alliances for the Calvin Klein brand through Coty Inc. (COTY) fragrance that promise to elevate brand visibility. The true growth opportunity for both Calvin Klein and Tommy Hilfiger, however, is in East Asian markets, such as India and Singapore, and South American markets like Brazil, where both names are considered premium brands. PVH Strategy . “PVH can increase sales of its brands and grow globally, but its true growth opportunity is outside of the U.S. and Europe. Both brands are more dynamic outside of the North American market.”
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
. “PVH made a strategic decision not to be in the U.S. where it knows it can’t be what it wants to be, while trying to be what it can be outside the U.S. where it is viewed as more of a premium brand.” . “Calvin Klein has done a good job pulling back from its off-price offerings. Anecdotally, you used to see full tables of Calvin Klein jeans in places like Costco. Now, you see a lot less volume in all of the off-price channels. … It seems like they are indeed making an effort to clean up the distribution with more controlled release of product to different channels.” . “Calvin Klein jeans may have declined in volume, but they have improved in margins and profits. They gave up some of the top line to improve the bottom line, and that is reflected in PVH’s overall growth.” . “The international piece, excluding Europe, is the growth story for Calvin Klein and Tommy Hilfiger. India, Singapore, South Korea and other parts of East Asia and South America have seen PVH making important moves in distribution and brand visibility.” . “Europe has been more challenging for the brands than in East Asia.” . “In India, for example, PVH/Calvin Klein has a close venture with Arvind Mills, and they have opened up impressive combination stores in the nation Calvin Klein jeans may have … that features [VF Corp.’s/VFC] Nautica and Tommy Hilfiger. … India has declined in volume, but they one of the best-run operations for PVH.” have improved in margins and . “There is an organization known as Media Radar, which evaluates how fashion brands are doing outside of the U.S., from a nonpaid media profits. They gave up some of standpoint. It looks at what designers are talking about because they set the top line to improve the trends. They found that outside the U.S., designers talk about Calvin Klein bottom line, and that is as being in the same company as [LVMH Moët Hennessy Louis Vuitton reflected in PVH’s overall SE’s/LVMUY] Louis Vuitton. That is not its position in the U.S., but it speaks growth. to the global status of the brand.” . “The Calvin Klein brand has strong brand recognition internationally, and its Lead Executive status is in good shape in markets outside the U.S. ever since PVH took Global Retail Consultancy over. The problem was at Warnaco, which was chasing the top line, not the bottom line.” . “We also see PVH involved in a new promotional strategy for Calvin Klein. I am referring to the alliance they now have with Coty, the fragrance company that owns the Calvin Klein fragrance. The alliance involves use of a joint spokesperson and advertising. Fragrance spends more money on promotion and advertising than the [Calvin Klein] brand, so they are striving to benefit from the halo effect of a combined promotional and advertising effort that can give the Calvin Klein clothing brand more visibility.” Calvin Klein . “Calvin Klein has stronger U.S. opportunities in the outlet offerings where its presence is still immature. Calvin Klein could double the number of stores in the outlet channel and still not reach penetration. I believe it would be critical to their growth in the U.S. to move into that channel. Calvin Klein’s business in Macy’s is good, but in general Macy’s business is not robust. Both Calvin Klein and Tommy Hilfiger depend on the department store channels, but the department store channel is not growing significantly. It is not like they are going to get double-digit growth in Macy’s. Therefore, the outlet piece is critical and certainly more profitable than the Costco/BJ’s discount segment.” . “Calvin Klein in the U.S. is strong in department stores and outlets, but it has a much smaller presence in the outlet channel, far less than Nike and Coach. Yet that outlet channel represents a $150 million to $200 million growth opportunity for Calvin Klein. It could be a sweet spot for Calvin Klein, and they would be crazy not to move into that channel in a bigger way.” . “Calvin Klein still has reasonable wholesale opportunities in other department stores beyond Macy’s. And they still have some regional, independent business.” Tommy Hilfiger . “Tommy Hilfiger is [like] a Macy’s private label in the U.S. Outside of the U.S., it is a premium, prestige brand close to brands like Louis Vuitton.” . “As Macy’s sales go, so go sales for Tommy Hilfiger. How Macy’s is doing is very much a good indicator of how Tommy Hilfiger is doing in North America.”
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
5) U.S. Macy’s Store Visits All five sources said Calvin Klein denim sales have not increased from a year ago. Four said sales growth is possible this year, though none said this was a likely occurrence. Aspects that could lead to sales increases include greater inventory following the port strike in California, the potential success of the spring line, and heightened marketing and brand awareness. Price is a consideration, and the brand sells better when on sale, including at one store where most items were 25% off. The displays have not done much to increase sales or traffic, including at one store that houses a shop-in-shop. A neighboring Levi’s shop- in-shop appeared more effective since it had all products in the same area. Tommy Hilfiger is meeting denim sales expectations in two stores, is flat in one store, and is down in another. One source is hopes the spring line will inject some energy into the Tommy Hilfiger brand, while another has not seen the collection yet. Lastly, two separate sources said both brands were using softer denim material in their jeans.
Key Silo Findings Calvin Klein Jean Sales - 5 of 5 said sales have not increased from this time a year ago. - 4 said an increase in sales in 2015 is possible, but none spoke with any confidence about its likelihood. o 1 said the store needs more inventory and has been hindered by the port strike in California. o 1 said the spring line could spur an increase as it will be accompanied by increased marketing. o 1 said Calvin Klein needs an increased presence and brand awareness to attract customers. o 1 said Macy’s discontinuation of Iconix Brand Group Inc.’s (ICON) Rocawear will create an opportunity for Calvin Klein. - 1 said management expects an increase in sales for the year. - 1 said prices are down 25% since September. - 1 said Calvin Klein sells when it is on sale. - 1 said the material has gotten softer. - 1 said it attracts an older demographic; millennials are not interested. - 1 said customers do not come in asking for Calvin Klein jeans. Calvin Klein Jean Display - Only 1 source appeared to have a shop-in-shop, and it was not helping sales. - 2 said the Calvin Klein area might get additional space. - None said the location and display for Calvin Klein were setting the brand apart or contributing to sales or traffic. - 1 said Levi’s shop-in-shop was more effective at drawing a crowd because it houses all products in the same place. Tommy Hilfiger - 2 said Hilfiger sales were at expectations. - 1 said sales were down year to year as jean sales were not as good as the previous year. - 1 said sales were not strong and jean sales were flat. - 1 said Hilfiger was losing popularity among the urban crowd who instead are opting for Ralph Lauren and PVH’s Izod. - 1 does not have the spring line yet or any price promotions. - 1 said the spring line looks good.
1) Macy’s men’s wear manager in a Kansas City suburb Sales of Calvin Klein and Tom Hilfiger are about the same as last spring. Improved inventory with the end of the shipping strike should help sales for the rest of 2015. Both brands have lower-profile displays compared with the holidays but still are on the aisle. Calvin Klein Jean Sales . “It is possible sales could improve here in 2015. Getting more inventory would help.” . “Sales are meeting our expectations.” . “Sales were OK over Christmas.” . “I can’t compare sales to a year ago. I came in May. Sales are about the same as then.”
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
. “We have not gotten much new of the Calvin or the Tommy for spring. They say we are going to get hit hard with more deliveries now that the port strike is over. Our inventory is not good. Everything has been trickling in.” . “I can’t speak to the quality of Calvin Klein. I have not gotten much feedback, and the store I was at before did not carry them.” . “I am not sure how prices compared to a year ago, but they are lower than in September. All of them are marked down about 25%.” . “Calvin is steady against the competition. Levi’s are our best sellers. As far as young men’s, I would have to say Calvin Klein and Guess [Inc./GES] do the best after Levi’s.” We have not gotten much new Calvin Klein Jean Display . “We moved them after Christmas from near the mall entrance to here of the Calvin or the Tommy for further down the aisle. The other location would have been better and it was spring. They say we are going to across from Polo. But this is in the young men’s area, so they are here with get hit hard with more the other brands for young men.” deliveries now that the port . “We didn’t have a sign put up for Calvin Klein when they got moved, but I strike is over. Our inventory is had one put up.” . “While the placement over the holidays was better, this is still a good spot not good. Everything has been on the aisle with competing brands.” trickling in. Tommy Hilfiger Macy’s Men’s Wear Manager . “[Tommy Hilfiger] is selling well. They are at expectations.” Kansas City Suburb . “I can’t compare them to last February, but they seem to be selling about the same as in May when I arrived.” . “We don’t have the spring line in yet, but we are expecting more as the strike ends. When we get shorts in, they will take over and jeans will go to the back. We always have some out because someone is always looking.” . “The most popular line seems to be the worn, washed-out look.” . “The darker ones don’t sell as much. I can tell that those stacks don’t go down as much as the lighter jeans.” . “I haven’t seen much change in price since last spring. None of the Tommy line is on sale right now.” . “They don’t have a high prominence display now, but in the fall they do and right after Christmas there was probably a full table of them because we get a big delivery at that time.” . “They sell well, but I am not sure if they are losing or gaining ground on their direct competitors.”
Reporter Observations: Neither brand had a great display or was easy to find. The Calvin Klein jeans were on shelves about 10 feet wide and three slots deep. One sign advertised the brand, but it was at the bottom of a list of four brands total and was obscured by a rack of other clothes. Three mannequins were wearing Calvin Klein in the display. Prices were marked down from $69.99 to $49.99 on most brands, with some simply marked 25% down. Tommy Hilfiger was harder to find because the merchandise was stacked on shelves beneath a display of spring-like shirts. A sign around the corner promoted Hilfiger, but it called more attention to the non-jeans items. Jeans were $59.99, and none were on sale.
2) Macy’s associate in New York City Jean sales have been consistent for Calvin Klein, but have been lower year to year for Tommy Hilfiger. Selling jeans at full price is difficult. The Calvin Klein stores at this Macy’s are being remodeled. Calvin Klein Jean Sales . “Sales are about the same as last year. I haven’t seen a lot of change. People think our jeans are expensive, so they usually come when there’s a sale.” . “We haven’t gotten our spring products yet.” . “The quality of the jeans is really good. From what I understand, the material has changed and gotten softer.” . “There is definitely competition with the jeans. DKNY [Donna Karan International Inc., of which LVMH holds a majority stake] is also popular. I don’t know exactly how the other brands are doing, but Calvin Klein is up there with them.” Calvin Klein Jean Display
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
. “We’ve made some changes to this space and are also making a lot of changes to the displays upstairs. Everything that was on the left is now on Sales are about the same as the right, and everything that was on the right is now on the left. It captures attention, but I also think people are getting confused. Where this location last year. I haven’t seen a lot of is now used to be a pizza place, so people still come and ask me where the change. People think our jeans pizza place went.” are expensive, so they usually Tommy Hilfiger come when there’s a sale. … . “Sales are slower than a year ago. The jeans aren’t selling as well as they The quality of the jeans is really were at this time last year.” . “Jeans have changed a bit. The material is much more stretchy and softer.” good. From what I understand, . “Eighty percent of the shoppers who come in are tourists who are willing to the material has changed and buy things full price. Spring items are selling even now; it depends on where gotten softer. the tourists are from. We’ve got shoppers from places like Brazil, where the clothes will match the weather. The shirt dresses are the best sellers, but Macy’s Associate, New York City the jeans are doing well also.” . “New Yorkers like to price-compare and wait for a sale, so we have to put sales on the items to move the items through faster.”
Reporter Observations: In the Calvin Klein store section, several jeans were 40% off or were $49.99. The Tommy Hilfiger store section was much larger, taking up four or five times the amount of space as Calvin Klein. Many items were listed as 25% off. Some items were on sale for $49.99 and listed as a one-day sale.
3) Macy’s associate in Los Angeles Sales of Calvin Klein jeans are about the same as six months ago. They tend to trend upward when coupons are offered for the brand. Tommy Hilfiger jeans are not as popular, but the brand’s dress shirts, casual slacks and sweater line have done well. Price points for Calvin Klein jeans have not changed and remain well below Joe’s Jeans Inc. (JOEZ) and DKNY. Customers ages 35 to 50 tend to be more price-conscious and are the key demographic for Calvin Klein, while shoppers 20 to 30 years old appear to be more willing to pay for Joe’s and DKNY. Both the Hilfiger sections and the shop-in-shop for Calvin Klein were completed in the last year. Spring collections have not arrived yet. Levi’s are still the top-selling jean for men at this store, with DKNY and Joe’s closely tied for second. Calvin Klein Jean Sales . “Calvin Klein jeans are doing about the same. I wouldn’t say they’ve gone up, but they are holding steady. Levi’s is still the best-selling jean in the Calvin Klein jeans could be store for men.” turning a corner. They do a lot . “Prices for Calvin Klein are the same at $49.99. I haven’t seen much variation on that except for what goes on sale racks or if we have the 20%- of splashy advertising on off sales.” billboards now, and they seem . “Calvin Klein jeans could be turning a corner. They do a lot of splashy to be shifting their approach. I advertising on billboards now, and they seem to be shifting their approach. I don’t have a lot of customers don’t have a lot of customers asking for them, but I could see it changing if the new line for spring comes with a few styles that are more urban or up-to- asking for them, but I could see date. Right now they do tend to be more of an older customer’s jean, not so it changing if the new line for popular with millennials.” spring comes with a few styles . “We sell more DKNY and Joe’s jeans here than any other brand aside from that are more urban or up-to- Levi’s. The price points are higher for DKNY and Joe’s, but the younger date. Right now they do tend to consumer has no problem paying that if they think they are getting the best quality or getting what’s hot. I think $100 and up is not a price certain be more of an older customer’s customers blink at for a pair of jeans anymore because they are not just jean, not so popular with worn on weekends or for a casual event. Jeans are an essential wardrobe millennials. piece, and they are more accepted at formal events and locations, especially if the brand is a Joe’s, DKNY or even Levi’s.” Macy’s Associate, Los Angeles
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
Calvin Klein Jean Display . “The Calvin Klein section is brand-new with a shop-in-shop for men. Foot traffic is about the same, and it doesn’t appear to have affected sales too much.” . “The Levi’s shop-in-shop has been extremely effective because everything is in one place.” . “The Hilfiger section is only about a year old, so that’s probably not changing either. If anything, we might move things around, like put men’s dress shirts and suits more closer together, but there’s nothing big changing.” Tommy Hilfiger . “Hilfiger doesn’t do well here. I think our customers are just a little more urban. The brand tends to be somewhat East Coast. It has that feel. Their sweaters did do pretty well over the holidays and into January, but the jean sales are flat. They don’t have the reach of Levi’s or even Calvin Klein as far as branding goes. They also don’t have a lot of styles to choose from.”
Reporter Observations: The Tommy Hilfiger shop-in-shop was much more upscale than Calvin Klein’s location, yet it was absolutely dead, similar to previous visits to this store in the last months. We noted no special pricing on Hilfiger items. Calvin Klein men’s shirts were on sale at $39.99 and available in lots of bright colors. Jeans for Calvin Klein were stacked and did not have any real obvious draw. Very few customers were in this section, but some were buying Calvin Klein dress shirts and underwear. Levi’s still dominates the men’s section. Levi’s had tied everything together and placed merchandise in one section. Calvin Klein’s jeans were displayed separately from its other merchandise. Signage for Macy’s credit card signups was prevalent.
4) Macy’s men’s wear manager in Georgia Sales are the same as last year for Calvin Klein but up for Tommy Hilfiger. PVH could increase same-store sales in 2015 if it broadens its presence and brand awareness in stores. Quality of both brands is average. Floor space has increased for Calvin Klein given the greater number of styles. The spring product has arrived, but the store is still selling fall/winter inventory. Calvin Klein Jean Sales . “They can increase same-store sales this year. However, they really need to increase their presence. I take customers to the Calvin Klein jeans when they don’t know what type of jean they want. I never have customers coming in specifically asked for Calvin Klein jeans.” . “Sales of Calvin Klein jeans are about the same as last year.” . “The spring product looks good. At my store we have increased floor space, and I think there is a bigger sales plan in the works.” . “What’s working is the larger selection of styles.” . “We are on par for our expectations of sales. Calvin Klein is a good, solid brand for us, so I am happy to have more jeans.” The spring product looks good. . “Quality? I’m indifferent. It’s not the best, but it’s not the worst we have At my store we have increased either.” floor space, and I think there is . “Their price points are medium—about the same as Levi’s.” . “In terms of quality, they are the same against the competition.” a bigger sales plan in the Calvin Klein Jean Display works. . “The biggest change is that they have more floor space. With the new styles Macy’s Men’s Wear Manager of jeans we have, we put in more tables for display.” Georgia . “I haven’t noticed any changes in traffic or sales. It just makes it easier for us to take customers to that section.” Tommy Hilfiger . “Sales of Tommy Hilfiger are good. We are doing better than last year, but I can’t really comment on how much better.” . “We are on schedule with our expectations.” . “We just got the spring product in, so it’s hard to say how it’s selling or what’s working. Right now we have a 50/50 balance of winter vs. spring products. I can’t tell if we are pulling new product or if it’s that we are selling out winter items. It’s been cold so we are still seeing winter sales.”
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
. “Sales of the spring product should meet expectations.” . “Quality of Tommy Hilfiger is good.” . “Price points are the same as last year. It’s a midrange product, about the same as Nautica.” . “Tommy Hilfiger is about the same as the competition.”
Reporter Observations: A few customers were in the Hilfiger section at 3:30 p.m. on a Thursday afternoon, but no one was in the Calvin Klein section. Hilfiger had its own area for “career” clothing. The separate Calvin Klein section was larger than for Hilfiger. Both sections had sales on winter items. We noted no signage related to the spring products.
5) Macy’s sales associate in Wisconsin Neither Calvin Klein jeans nor Tommy Hilfiger products are strong sellers. Both are considered classic brands that have loyal customers. The ads with Justin Bieber were having no effect on sales, and the sales staff was unaware of the campaign. In the men’s department, sales of the Calvin Klein business casual line are expected to grow. The Rocawear brand pulling out of Macy’s also could help increase Calvin Klein sales. In women’s, the trend in clothing is Michael Kors Holdings Ltd. (KORS), which has an in-store shop now. Skinny jeans remain the trend, but bootcut is coming back. For men, Levi’s remain king; Calvin Klein jeans do not sell because they are too fitted for most guys. Calvin Klein Jean Sales . “In the men’s section, Calvin Klein jeans do not sell. Most guys cannot fit into them. They are cut way too slim.” . “The section that sells for Calvin is the business-casual wear. That whole section does well.” . “I could see Calvin Klein sales increasing this year in men’s because Macy’s has discontinued a few popular brands like Rocawear, which was not by choice because it sold well.” . “In ladies’, Calvin Klein is a classic brand. It sells to who likes and is loyal to the brand.” . “I don’t expect any kind of upsurge in Calvin Klein sales this year. They stay pretty steady and don’t change much season to season.” . “I have not heard anything about Justin Bieber and the new ad campaign. I don’t see that having any effect on sales.” . “The trend in ladies’ jeans has been skinny jeans and jeggings and that is still going strong, but the bootcut has started coming back into fashion again.” Calvin Klein Jean Display . “The Calvin Klein men’s section has not changed in the last few months. Maybe it will soon since we just finished selling through most of the Rocawear and the other brands that were not carrying now.” . “Since the holidays, we have not moved the Tommy Hilfiger area in either the men’s or ladies’ departments.” . “In ladies’, we moved the Calvin Klein jeans display fixture a bit more towards the center of the area. It was more on the corner before.” . “In women’s clothing, Michael Kors is on the upswing and is trending well. We have a whole Michael Kors in-store shop now.” Tommy Hilfiger . “African-American men don’t buy Tommy anymore. It is not considered cool. It had been a big seller in the two years I have been here. They are buying Lacoste and Polo now. That is what is in.” . “Levi’s are the jeans men buy most often.” . “The older guys buy Levi’s, Ralph Lauren/Polo and Buffalo jeans.” . “I occasionally see a polo-style shirt sell from the Hilfiger section, and we just got those in. Other than that, their clothes do not really move.”
Reporter Observations: The women’s Tommy Hilfiger section was next to the entrance, with the DKNY and Calvin jeans area just past it. Calvin Klein jeans were on sale for $49.99, but the display also had a confusing 40%-off sign. The Calvin Klein Jeans table had been moved from the corner to the center of the section. One rack each was 75% and 25% off while two racks were 50% off in the Tommy section. Inventory appeared solid for both Hilfiger and Calvin jeans. In the men’s Calvin Klein section, a few racks were 65% off original price while others listed at 50% off, 40% off and 25% off. At least one-third of the section was on sale. The men’s Tommy Hilfiger section was more toward the back of the
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
department and down the aisle from Polo, Levi’s, Ralph Lauren and Calvin Klein sections. One rack was filled with clearance items at 50% and 60% off, but most other Tommy Hilfiger items were full price.
Secondary Sources The following nine secondary sources discussed developments for Calvin Klein and Tommy Hilfiger in Europe and the United States.
Calvin Klein in Europe Calvin Klein is expanding its ecommerce platform to more than 20 countries. The brand has surprised consumers and fashionistas with its black and gray theme for the autumn/winter 2015 men’s lineup. It also continues to focus much of its marketing efforts on varying social networks. Due to the weakening Russian ruble, Calvin Klein stores are making an effort to keep merchandise prices from skyrocketing.
Dec. 25, 2014, Jewish Business News article PVH’s Calvin Klein brand will be expanding its ecommerce operations to more than 20 countries by the end of 2015. Each new website will feature product offerings that match its corresponding market. . “Apparel brand Calvin Klein, owned by PVH Corp, said it will expand its e-commerce operations to more than 20 countries by the end of 2015, business-to-business platform Fibre2fashion.com said.” . “Calvin Klein said the individual websites will share a consistent look and feel but be localized by product offerings and site functionality to meet consumer preferences and needs within each market, the report said. The roll-out, anchored by the re-launch of the company’s digital flagship in the U.S., has expanded throughout Europe, North America and South America and will continue across Asia, said the report.” . “According to the apparel brand, the sites will be available for both desktop and mobile devices, with social media integration, and provide a premium brand and shopping experience, the report said.” . “With newly-introduced sites now operating in 14 European markets, as well as Brazil, the expansion is already underway. There are now sites for Austria, Belgium, Denmark, Finland, France, Germany, Italy, Ireland, Luxembourg, The Netherlands, Poland, Spain, Sweden and the United Kingdom, the report said.” . “Expansion will continue globally via the establishment of direct e-commerce sites in Asian markets over the next two years.”
Jan. 18 article from The Guardian At Milan’s men’s wear fashion week, Calvin Klein featured black, gray, and white colors for the autumn/winter 2015 collection. The brand has successfully created awareness via its social media campaign, tapping into celebrities to showcase the Calvin Klein brand. Its ecommerce expansion is projected to bring double-digit growth in some areas. . “Sam Taylor-Wood’s adaptation of the bestseller is not yet in cinemas but there were 50 shades of gray on the Calvin Klein catwalk at Milan’s menswear fashion week on Sunday afternoon. The autumn/winter 2015 collection by Italo Zucchelli, Calvin Klein’s creative director, was inspired by the colour palette of black and white movies. What Zucchelli excels at is finding a formula for a season and showing it from every angle—something that makes sense in menswear, an arena where tweaks to tried-and-tested formulas trump seasonal overhaul.” . “The brand is emphasising digital growth this year. Invitations for this show had #calvinkleinlive printed on them, inviting the front row to use the hashtag when posting on Instagram. This follows last year’s successful #mycalvins campaign around the relaunched branded underwear. Users of Instagram, including celebrities Kendall Jenner, Miranda Kerr and Daisy Lowe, posted selfies of themselves wearing the underwear, with the hashtag eventually generating 11m likes, shares and comments across 25 countries. The new advertising campaign for Calvin Klein Jeans, featuring model Lara Stone and singer Justin Bieber, continues the brand message, with #mycalvins in the top right hand corner.” . “E-commerce is next. Sites exist across Europe and America and a Chinese version, calvinklein.cn, launches in March. This is projected to bring double-digit growth to the brand in the region by 2020.”
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
Feb. 3 article from The Business of Fashion Calvin Klein stores in Russia will limit price growth in response to the destabilization of the ruble. . “BNS Group, the Russian distributor for Michael Kors Holdings Ltd. and PVH Corp.’s Calvin Klein, is seeking to limit price growth to keep same-store sales level this year as the economy slides into recession.” . “The weak ruble will push up prices and may buoy revenue in the Russian currency even if consumers buy fewer items of imported apparel, according to BNS Chief Executive Officer Denis Bogatyrev.” . “‘We are make all possible effort to limit the growth of prices for consumers, including talks with suppliers about lowering their prices,’ Bogatyrev said. ‘We may consider closing some unprofitable stores.’”
Calvin Klein in the United States Amazon.com Inc. (AMZN) hopes to woo Calvin Klein onto some of its websites by sponsoring the first men’s wear version of Fashion Week. Some critics question whether Calvin Klein can again become a strong luxury brand after years of lowered prices and placement in discount stores. Calvin Klein’s new ad campaign featuring Justin Bieber generated a massive amount of buzz in social media networks.
Feb. 18 InternetRetailer.com article Amazon.com wants its websites to pedal higher-end fashion, including from Calvin Klein. Amazon is sponsoring the first men’s wear version of fashion week in New York this summer. Industry experts believe Amazon may struggle to source and sell luxury brands on its site. . “Three of the company’s fashion sites—Amazon Fashion, East Dane and MyHabit—will sponsor a menswear version of Fashion Week in New York as Amazon.com continues its push to enter the designer clothing world.” . “For the first time, a menswear version of Fashion Week will come to New York this summer. Bulbs will flash as photographers hustle to document the best looks from the spectacle’s dapper attendees. Designer labels such as Calvin Klein, Michael Kors, and Rag & Bone will showcase their most creative garments on radiant catwalks. And plastered on it all will be the name of an unlikely retailer: Amazon. Three of the company’s fashion sites—Amazon Fashion, East Dane and MyHabit—will sponsor the event, the Council of Fashion Designers of America announced earlier this month.” . “Amazon.com Inc., No. 1 in the Internet Retailer Top 500 Guide has, in recent years, pushed to enter the world of designer fashion, selling clothing, shoes, handbags, and accessories from pricey brands with [lux] reputations. Amazon reportedly also signed a multiyear deal last week to sponsor India Fashion Week, according to Women’s Wear Daily.” . “Industry observers say it’s difficult to insert couture items under the Amazon banner, which has long thrived on offering a practical, easy way to buy just about anything. Fashion, on the other hand, is often impractical, dominated by unpredictable trends and personal taste.”
Feb. 5 CNNMoney article Luxury apparel brands, including Calving Klein and Tommy Hilfiger, have struggled since they lowered their prices following the Great Recession. Many consumers question whether these names still are considered luxury brands given their lower prices and presence in discount stores. The strong dollar is causing Calvin Klein and Hilfiger items to be more expensive in Europe. . “Well-known brands like Michael Kors (KORS), Ralph Lauren (RL), Calvin Klein and Tommy Hilfiger are struggling. When the Great Recession hit, they lowered their prices to try to keep sales strong. Now those discounts are a drag on the bottom line.” . “Even worse, people are skeptical about whether these are still ‘luxury’ names when they can buy the products in so many discount outlets. ‘When people see how ubiquitous they’ve become and everyone has a Michael Kors bag, it loses its luster. It loses its fashion credibility,’ says Ike Boruchow, a senior research analyst at Sterne Agee who covers specialty retailers.” . “Like many retailers, Ralph Lauren tried to compensate by expanding on the web and abroad, but that strategy isn’t looking so great as Europe’s economy continues to struggle and the strong dollar makes American clothing seem very expensive abroad. It’s likely to be a similar issue for Calvin Klein and Tommy Hilfiger. Both have about half their
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
business overseas now notes Bridget Weishaar, an equity analyst at Morningstar. ‘Foreign exchange will be a real headwind for them,’ she says.” . “Retail experts say these brands are trying to figure out what customer they want to go after and at what price point. Calvin Klein is actually trying to raise the price of its jeans to go after higher-end customers again, Weishaar notes.” . “Dovetl”: “Funny I see these brands as ‘made in china’ junk” . “Smackykins”: “An upscale company can easily move downmarket but it’s most difficult to move back up. Close to impossible actually.” . “RJCalifornia”: “Calvin Klein, Tommy Hilfiger and Ralph Lauren are considered ‘luxury’ brands???”
Jan. 20 Women’s Wear Daily article A new Calvin Klein ad campaign featuring Justin Bieber and Lara Stone led to a huge uptick in the company’s social media channels. Calvin Klein received even more attention when Saturday Night Live parodied its Bieber/Stone ads. A total of 172 million media followers received campaign-related posts published by Calvin Klein, Bieber, Stone, Alas and Piggott’s social channels, fueling 25.5 million fan interactions. . “Calvin Klein caused a spike in Bieber Fever. Since the brand unveiled Justin Bieber as the face and body of its spring underwear campaign two weeks ago, its social channels have added a combined 3.6 million followers. It probably didn’t hurt that Lara Stone seductively posed alongside Bieber in several of the images shot by Mert Alas and Marcus Piggott—but Bieber was clearly the main attraction.” . “In the first 48 hours after the launch, the hashtag #mycalvins generated 1.6 million Twitter mentions. That’s five times the number of mentions that Kim Kardashian’s naked Paper Magazine’s cover shoot drew with the #breaktheinternet hashtag.” . “Saturday Night Live parodied the unlikely pairing of Bieber and Stone. Ellen DeGeneres and Miley Cyrus each ‘re- grammed’ an image from the campaign with their heads superimposed on Stone’s body—getting a quirky take on Calvin Klein’s message out to their combined following of 23.1 million.” . The brand carefully teased the partnership with a video on its social media platforms before the news was officially released by Bieber via Instagram on Jan. 6. That initial post, with a caption that reads ‘Officially part of the legacy,’ has garnered almost 1.6 million likes to date.” . “Throughout the day of the release and the following day, the hashtags #mycalvins #JustinWereReady #newfaceofcalvinklein and terms ‘Calvin Klein,’ ‘Lara Stone’ and ‘Justin’s Calvin Klein’ trended worldwide on Twitter. Since Jan. 6, the hashtag #mycalvins has seen 1.85 million Twitter mentions.” . “As of Friday, the campaign’s various posts elicited 4.4 million interactions on Twitter, averaging 74,200 interactions per post, according to the brand. On the afternoon of Jan. 9, the campaign became the top Facebook trend—no small feat, considering the social network has 865 million active daily users.” . “In total, more than 172 million social media followers received campaign-related posts published by Calvin Klein, Bieber, Stone, Alas and Piggott’s social channels—fueling 25.5 million fan interactions. The spring Calvin Klein Underwear campaign video, which was tracked by True Reach, has received more than 20 million views so far on YouTube, calvinklein.com, Facebook, Twitter, Instagram, Weibo and Fahlo.”
Tommy Hilfiger Tommy Hilfiger’s chief marketing officer has successfully transitioned the brand overseas. The brand has made a strong comeback since the mid-2000s when its downstream strategies resulted in lost interest among more affluent customers.
Feb. 17 Adweek article Avery Baker has successfully transitioned Tommy Hilfiger overseas, and the brand’s financial results prove it. She discovered that consumers wanted to learn more about the Tommy Hilfiger models, and will be producing a video that gives them an inside view of the actors on set. . “Avery Baker is the embodiment of Tommy Hilfiger’s ambitions to export its preppy vision of Americana, full of plaid and cozy sweaters, to the rest of the world. With a casual country-club polish, Baker operates as Hilfiger’s chief branding officer and CMO. From her adopted hometown of Amsterdam she’s overseen a steady climb in sales this year, besting sibling brand Calvin Klein (both are owned by PVH Corp.) In fact, PVH reported last fall that Hilfiger’s profit rose 9 percent to $870 million in its fiscal second quarter.”
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
. “America is an aspirational brand that has an enduring appeal despite what is happening in the news. People in many countries, including here in the Netherlands, respond to some of the core values that American culture and this brand have in common—diversity and optimism, being inclusive and youthful. They still see the U.S. as fun, authentic and free-spirited.” . “We wondered about that [if people wanted to know more about the fictitious Hilfiger clan seen in advertisements] and did some testing. We discovered that people didn’t want to know more about the fictional characters, but about the real actors who play them. Consumers wanted to see the behind-the-scenes action and what the guy who plays Arthur Hilfiger is really like. So we are producing video that includes the action during the photo shoots, and we’re exploring how to get the actors involved in our promotional events.”
Dec. 11, 2014, Business Insider article Tommy Hilfiger has successfully rebuilt its brand since the mid-2000s when it began to follow trends and performed poorly. Sales have rebounded since Tommy raised prices, offered smaller sizes and cut off stores. . “Tommy Hilfiger has successfully come back from the brink of extinction. The retailer had been crashing since logos and baggy jeans went out of fashion in the ‘90s. ‘We made the mistake of following a trend that was going to be short-lived,’ Hilfiger told Forbes Magazine, ‘because any trend is short-lived.’” . “Sales at the chain are now soaring thanks to an unconventional plan, writes Claire O’Connor at Forbes. The new plan is ‘breaking all the rules of modern retail: raising prices, tailoring clothes smaller, alienating customers and cutting off stores,’ O’Connor writes.” . “The strategy is effective: revenues hit $3.4 billion in 2013, a 7% increase from the year before. Tommy Hilfiger’s downfall happened a decade ago after the company began selling its merchandise to downmarket department stores like Kohl’s. The brand had become too ubiquitous, and needed to resonate with wealthy customers in order to once again become a successful aspirational brand. As its reputation suffered in the US, executives sought to turn business around in Europe. Today, Tommy Hilfiger is focused on regaining market share in the US.”
Jan. 28 Pursuitist.com article Tommy Hilfiger is launching a digital sales showroom at its corporate headquarters that will help customers shop, train its sales staff, and streamline the efficiency of its sales process. . “Tommy Hilfiger announced the launch of a pioneering new digital platform that it hopes could revolutionize the traditional sales experience today. This new concept—a digital sales showroom—will debut at its global headquarters in Amsterdam. ‘Without a digital complement in your business, there is no future,’ said Daniel Grieder, CEO, Tommy Hilfiger, in a distributed video interview about the launch of the showroom, which offers retailers a more engaging and seamless buying approach through an interactive system that blends collection information, sales tools, and brand content in a touchscreen interface.” . “‘Our new digital showroom concept completely reimagines the traditional buying approach and establishes a new fashion industry benchmark for business to business sales,’ continued Grieder. ‘The concept also supports our ongoing focus on efficiency and will significantly streamline and enhance the Tommy Hilfiger sales experience.’” . “What retailers can now expect at the digital showrooms—the brand is announcing rapid expansion of this concept— is an interactive half-meter by one-meter touchscreen table set in a sleek walnut frame, which connects to a four- meter-high wall-to-wall grid of ultra-high-definition 4K screens.” . “Customers can digitally view every item in the Tommy Hilfiger sportswear and Hilfiger Denim seasonal collections and create custom orders with all product categories laid out across a single screen. [Grieder] asserts that feedback has been ‘amazing.’”
Additional research by Isabel Bernabe, Carolyn Marshall, Kevin Martin, Jacqueline Fox, Eugenia Lee, Cindy Elsberry and Tina Strasser.
The Author(s) of this research report certify that all of the views expressed in the report accurately reflect their personal views about any and all of the subject securities and that no part of the Author(s) compensation was, is or will be, directly or indirectly, related to the specific recommendations or views in this report. The Author does not own securities in any of the aforementioned companies.
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PVH Corp.’s Calvin Klein and Tommy Hilfiger
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