Calvin Klein to reorganize jeans business

By

Olivier Guyot

Published
Dec 15, 2013

For the PVH group, integrating the Warnaco teams and business was a major focus of its 2013 strategy. According to company management, the process is nearly finished in Europe and should be completed by the end of the year. These steps will then be implemented in other parts of the world throughout 2014.

Beyond changes to its operational structure, PVH management must deal with Calvin Klein Jeans and Calvin Klein Underwear lines as part of their acquisition of all of Warnaco. These lines represent a significant share of the brand's sales and were made by the licensee. With the acquisition, Calvin Klein brand owner PVH has clearly signaled its intention to reposition and reorganize the distribution of these two lines.

For its last quarter ended November 3, Calvin Klein sales came in at 582 million euros ($800 million dollars). In North America, retail sales grew by 3% in comparable activity and global wholesale sportswear posted a double-digit increase. In Europe, store sales on a comparable basis contracted by 1%, while the brand was pleased with its progress in Latin America and Asia. The Calvin Klein business brought in 317 million euros in North America and 263 million euros internationally.

However, group CEO Emanuel Chirico said that the CK Jeans line is "the only difficulty." Denim represents "between 15 and 20% of business” for the label and is declining in most markets. The group said it is "working to clear inventory and focus on the redesign and repositioning of its offerings in that product category." The first models from these efforts could reach stores in 2014.

In Europe, the brand is also undergoing a full restructuring of its distribution network, particularly in southern Europe, where it is trying to limit the sale of it jeans and underwear lines at discounted prices. "Our plan is to right-size the distribution of jeans and underwear," said Emanuel Chirico. "This should allow us to improve our sales at full prices." The objective over the next two years is to make steep cuts in sales at bargain prices, which currently dominate in the jeans and underwear lines. As part of this effort the group is expected to close 15 to 20 underperforming stores that no longer corresponds to its positioning in Europe between the end of 2013 and early 2014. The brand intends to achieve these goals through marketing investments.