PVH: Emanuel Chirico talks about plans for Calvin Klein

By

Olivier Guyot

Published
Sep 8, 2014

For its last quarter ending on August 3, Calvin Klein posted sales up 1% to 518 million euros. The growth may seem modest for the PVH-owned brand, but its comes at a time when it is restructuring its range of jeans..
Since the announcement of intentions to rework Calvin Klein Jeans in late 2013, the company has made significant progress. It has worked in particular on the products themselves as well as its distribution network.

During a conference call with financial analysts, PVH CEO Emanuel Chirico said that the brand has "significantly upgrades its denim offering to align with the positioning of Calvin Klein’s other lines." Accordingly, in the United States, men’s and women’s entry-level jeans rose from 49.50 dollars (38 euros) to 69.50 dollars (54 euros).

And the brand intends to introduce a higher positioning for the entirety of its range. "So we’re looking for AUR somewhere in the – approaching $30 out-the-door which we still don’t believe is where we need to be (…),” said Chirco. “The financial is for a gradual improvement from $25, $26 to $40 over the next three to four years."

As a result, the brand has revamped product distribution, closing stores that no longer met expectations, particularly in Europe. It also announced plan for openings in order to boost the line. "We will open about 150 shops in Calvin Klein jeans men’s and over 50 shops in Calvin Klein women’s across North America,” said Chirico. “And we will open about 80 new shops across Europe in the third quarter. We have opened about 20 men’s jean shops in August and we have seen a significant uplift in initial sales post-installation with healthy sell-throughs.”

An operating margin above 10%

Although he insists that "the first models have just arrived and so it is too early to draw conclusions,” Chirico's has expressed his ambitions for Calvin Klein Jeans. "Our Calvin Klein European jeans business and our Calvin Klein North America jeans business when you put it together they are marginally profitable businesses. There’s no reason why those businesses over a period of time shouldn’t be operating at, let’s just take 10% operating margin. Our other in-house Calvin wholesale businesses really track much higher than that, but let’s get the 10% first. So we think over the next three years, there’s opportunity to take operating margins that today were 2% and really drive it. The key is going to be to increase the average unit retails on these goods.”

Eventually, Chirico said that the potential for Calvin Klein Jeans is 300 doors on the men’s side and 400 for women sin North America.

In Europe, he said that wholesale business for the line is between 77 and 115 million euros. "If you put that into comparison to the Tommy business which is over $1 billion, it just gives you a sense of the opportunity and how underdeveloped the business is in Europe."

But in order to realize that potential, the executive has been cautious. In his opinion, Calvin Klein Jeans has to demonstrate performance in terms of its product range. He said that while bottoms have been quite successful, tops are not yet up to the brand’s standards.

He also said that the women’s range, as with the entire range of jeans, is facing competition from a vibrant activewear sector, which has given it even more reason to improve.