Calvin Klein and Tommy Hilfiger are benefitting from savvier distribution strategies, which are saving them from clearance sales.
Parent company PVH Corp reported in its financial 2017 earnings report that revenue was up 9 percent year-over-year, to $8.9 billion. That growth was stemmed by PVH’s other heritage brands, but Calvin Klein and Tommy Hilfiger saw considerably higher sales spikes of 20 and 28 percent, respectively.
According to PVH Corp CEO Manny Chirico, both brands’ turnarounds can be attributed to an emphasis on digital distribution, differentiated strategies like Calvin Klein’s partnership with Amazon and Tommy Hilfiger’s in-season capsule collections, and a faster knee-jerk reaction to fulfilling inventory needs and bringing production orders closer to the manufacturing process. It also helps that department store sales — even Macy’s — have returned to growth, with more inventory selling out at full price and less aggressive clearance sales.
Like many fashion brands in its category, PVH is reorienting to put an emphasis on customers and how they like to shop.
“Customer engagement is our critical focus,” said Chirico during a call with investors on Thursday. “We’ve seen a clear inflection point in these businesses as we continue to reach a new audience. We’re also benefiting from the fashion trend cycle, now that the ’90s logos are back.”
Overall, both brands have become smarter about where they distribute different tiers of product, which, according to Chirico, has resulted in “clean inventory,” higher sell-through rates and limited promotions. The strategy is centered around more exclusives and limited-edition runs for different retail partners, and direct channels.
Specialty retailers like Urban Outfitters, which cater to younger millennials and Gen Z, stock heavily logoed lounge and activewear from Tommy Hilfiger and Calvin Klein, fitting for the ’90s trend revival. High-end department stores and e-commerce sites like Net-a-Porter are reserved for Raf Simons’ collections for Calvin Klein. Exclusive capsule collections in categories like denim live only on the brands’ sites.
Amazon, which Calvin Klein partnered with in the fall on an exclusive collection and in-store pop-up, is strictly for basics. Chirico said that between 70 and 80 percent of Calvin Klein’s inventory on Amazon is made up of the underwear and loungewear categories.
“That mix will change over time, but at this point, there’s a slow evolution as the customer gets more and more comfortable buying fashion online. Right now, Amazon is built on replenishment and keeping customers happy with core categories,” said Chirico to investors. “Amazon Fashion needs to be further developed; it’s not where it needs to be right now. There’s opportunity there, but they don’t have the metrics or presentation of product at this point that would really drive it.”
Overall, e-commerce is driving the most growth at PVH, with revenues from e-commerce and mobile commerce up by 20 percent for the year. (The company doesn’t share specific figures for digital sales.) Chirico said the company’s focus going forward will be on direct-to-consumer sales through brands’ e-commerce sites, as well as physical stores.
He also noted that the Tommy Hilfiger x Gigi Hadid capsule collection sales were concentrated on Tommy Hilfiger’s website. The brand’s bet that customers would want to buy up a capsule collection co-designed by model Gigi Hadid paid off, even as other attempts at see-now-buy-now sputtered. In the third quarter of 2017, during the time of the fall fashion show, revenue increased 10 percent, to $1 billion. In the fourth, during the spring show, revenue increased 22 percent, to $1.1 billion.
The key to the success of the collection was that pieces available for immediate sale fell in the $100 to $200 price range, and consisted of wearable items like sweatshirts and bodysuits that younger customers eat up.
“This is a case where it makes sense. Customers may not buy expensive luxury on their phones an instant after seeing it, but will they buy a branded sweatshirt that could sell out any minute? Absolutely,” said Rachna Shah, a partner and managing director at fashion PR firm KCD Worldwide.
Immediacy is something that’s being adopted across the company, as both brands work to narrow the timeframe between production and sales floor. Right now, basics like underwear can be replenished in 10 days.
“Speed to market is a focus for us. We’re up and running on the core product side — now it’s read and react in fashion categories,” he said. “If you can’t keep up momentum, you lose it, and you lose the sale. So this has been a great investment for us.”