For Calvin Klein’s Parent, China Is Healing — But Europe Is Hurting Badly

PVH Corp is pushing a DTC reset amid tariffs, Europe woes, and a shaky transition year.

• In early December, CEO Stefan Larsson said that in Europe, the company saw a more challenging backdrop entering the fall, while the Asia Pacific region exceeded expectations.
• The company’s gross margins have also been squeezed this year mainly arising from a plethora of factors, including tariffs and an increased promotional environment.
• PVH now expects tariffs currently in place will have an overall net negative impact of about $65 million, with an unmitigated impact on core profit.

The highly volatile macro environment has not spared even Calvin Klein and Tommy Hilfiger’s parent, PVH Corp, which is undergoing a transition like several other retailers in the United States, trying to focus on growing margins and pushing up revenue.

PVH has been working to revive China's growth, bring previously-licensed Calvin Klein and Tommy Hilfiger businesses in-house, and navigate a tariff maze.

The company’s stock has tumbled more than 34% so far this year, mainly due to concerns about cost increases following U.S. President Donald Trump’s tariffs on global trading partners, primarily Southeast Asian countries.

Wholesale To DTC Pivot

The pivot that PVH began in 2022 to become a more direct-to-consumer brand has not yet fully taken shape. The company has been working to reduce the number of wholesale partners to boost its direct-to-consumer business, a plan outlined to run through 2025.

In 2022, the company said that it expected 2025 financial objectives to include a total revenue target of $12.5 billion, with operating margin expanding to 15% and free cash flow above $1 billion.

However, so far this year, the company has reported total revenue of $6.45 billion for the nine months ending Nov. 2. In the third quarter, direct-to-consumer revenue was also down 1%, while wholesale revenue grew 1%.

China Rebounding, But Europe Now The Sore Point

In early December, CEO Stefan Larsson said that in Europe, the company faced a more challenging backdrop entering the fall, while the Asia Pacific region exceeded expectations, driven by strong direct-to-consumer performance, with notable improvement in China.

In China, PVH said that direct-to-consumer revenue grew in mid-single digits but was offset by lower wholesale revenue. 

The company said in September that it observed more muted activity from its European consumers. Larrson noted that the expected delays from the transitory Calvin global product challenges put extra strain on the company’s European distribution center, impacting shipments for both Calvin and Tommy, which resulted in a few critical weeks of lost full-price selling.

PVH And Sore Points

Tommy Hilfiger has been a consistently well-performing brand for PVH. Still, recent hiccups in the European region led the company to see only a 1% jump in Tommy Hilfiger revenue in the third quarter.

The company’s gross margins have also been squeezed this year, primarily due to a range of factors, including tariffs and an increased promotional environment. Telsey Advisory Group’s analyst Dana Telsey also noted that the transition of previously licensed businesses to an in-house wholesale model, and discounts to customers for delayed Calvin Klein products.

However, PVH now expects the tariffs currently in place to have an overall net negative impact of about $65 million, unmitigated impact on core profit, or nearly $1.05 per share, compared to previous guidance of $70 million and $1.15 per share.

CFO Transition

In late November, PVH said that CFO Zac Coughlin would be departing the company to pursue an opportunity outside of the retail and apparel industry. Coughlin is said to remain with PVH through the end of the calendar year.

The company said that Melissa Stone will serve as Interim CFO and has been with PVH for more than two decades, currently serving as Executive Vice President, Global Financial Planning & Analysis.

What Is Retail Thinking?

Retail sentiment also improved to ‘neutral’ from ‘bearish’ territory compared to a day ago, with message volumes at ‘high’ levels, according to data from Stocktwits.

Shares of PVH Corp have declined by over 36% in the last 12 months.

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