While PVH Corp. certainly struggled along with most companies through the first quarter, with a $1.1 billion net loss and significant sales decline, the apparel giant has learned some valuable lessons from the economic crisis created by the COVID-9 pandemic.
PVH executives told analysts on a conference call they have seen some pleasant surprises amid the staggering effects of store closures and general economic downturn from the coronavirus spread, including in channels of distribution and consumer preferences.
“Overall, we see that the COVID effect on our business reflects big accelerations of existing underlying consumer market trends,” Stefan Larsson, president of PVH, said. “An increased focus on e-commerce, product relevance and consumer engagement will be core priorities as we are driving toward an accelerated recovery.”
PVH chairman and CEO Manny Chirico said the company’s digital businesses, both its own and with wholesale partners, “had outstanding performance and became our number-one most critical channel for business during the quarter, with our European digital businesses being the strongest outperformer of any of our markets.”
Larsson said PVH has “supercharged” its e-commerce channels across all brands and regions, both own and operated, and is collaborating closely with Tmall, Zalando and Amazon, among others, “in ways that moves us to where the consumer is going.” This included live online events and product launches, as well as connecting inventory from brick-and-mortar stores to serve e-commerce.
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“What is exciting to see is that our consumers have expressed a strong demand for our brands across all digital platforms,” he said. “A few examples–our own digital businesses had excellent performance during the first quarter. Calvin’s digital revenues were up 40 percent and Tommy’s own digital business up over 60 percent, with triple-digit increases in the second quarter to date.”
The Calvin Klein North America e-commerce business turned a quarterly profit for the first time in its history, Larsson noted. In Asia, the company furthered its partnership with Tmall by featuring a virtual exhibit for the CK One product drop.
“In Europe, we accelerated the rollout of connected e-commerce with Zalando and…and our ship-from-store penetration reached double-digits for Zalando in April and May,” he said. “In North America, our Amazon business benefited from significant growth in prime memberships, and this month, we will participate in their summer sales for softlines.”
Larson noted that brand marketing has also been redirected toward social and digital “to reflect the time we are living in.”
“For Calvin, we hosted monthly livestream sessions from WeChat using local talents in the campaigns,” he said. “At Tommy, we livestreamed our spring collections with the ability for consumers to purchase directly from the event for wear-now product. Tommy also hosted four celebrity live-streams on short video platforms, which secured 1.5 million views and helped us convert both new and existing consumers to purchase. All our brands have refocused on engaging with the consumer in a more interactive way than any time before.”
Overall during the period, PVH’s core Calvin Klein and Tommy Hilfiger brands have “continued to experience excellent consumer response,” Chirico said, “demonstrating strong brand health and loyalty during the crisis. Each brand attracted new consumers visiting our sites for the very first time, with good conversion and strong purchasing behavior over this period.”
Discussing product assortment across brands and regions, Larsson said PVH has seen consumers gravitate strongly toward essential products. There is a big increase in demand for essential categories such as underwear, loungewear, T-shirts, hoodies and activewear, as well as jeans.
“The Calvin Klein lifestyle is truly resonating with consumers during this time, particularly our underwear, loungewear, activewear and wear-now offerings,” he said. “Our CK One launch had an Instagram reach of 57 million people. We also launched our Tommy Jeans Luna Jeans capsule in a live stream partnership with Tmall, achieving over 45 million impressions.”
Larsson noted that as stores reopened, smaller doors have been performing well in local areas that don’t rely on tourism. “It will be critical to target that domestic consumer for the remainder of the year, as international consumers are traveling much less, and we don’t expect this trend to materially improve this year,” he said.
“Our wholesale partners saw business improve with introduction of curbside pickup and ship-from-store,” Larsson said. “Digital conversion is significantly higher than last year and we are attracting a lot of new consumers shopping outside. We believe that the recovery in North America will follow a slightly slower recovery trajectory than Europe and we expect that promotions will be elevated.”
Chirico said these omnichannel developments have prompted PVH to take “a hard look at how that needs to develop.” Stores that were marginally profitable before the pandemic, he added, must be reevaluated with an aim “to streamline the portfolio.”