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Jul 01, 2023

PVH Targets 25 Percent Cut to Inventory Relative to Sales

PVH Corp. is looking to do more with less. Stefan Larsson, chief executive officer, said the Tommy Hilfiger and Calvin Klein parent is planning a 25 percent cut to inventory as a percent of sales by

PVH Corp. is looking to do more with less.

Stefan Larsson, chief executive officer, said the Tommy Hilfiger and Calvin Klein parent is planning a 25 percent cut to inventory as a percent of sales by the end of 2024.

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“Our supply chain improvements continue to accelerate and will provide us with a drastically improved inventory-to-sales ratio over the coming years with much higher on-time and accuracy in deliveries, shorter transportation lead times, more responsive production models and more data-driven planning tools across our supply chain,” Larsson told analysts Wednesday on a conference call for the company’s second-quarter results.

Larsson, who cut his teeth coming up the ranks at fast-fashion powerhouse H&M, said it comes down to focusing on product categories, hero products, how assortments are built and then planning closer to demand and cutting lead times.

“This is my experience … you have to get the foundational pieces right, then you have to work super closely upstream with the product creation teams,” the CEO said.

That’s the back end of what is intended to be a very step-wise transformation at PVH.

At the front end, the company is looking to connect its brands with consumers in a way that is both global and repeatable.

At Tommy Hilfiger, Larsson pointed to the brand’s work around “talent amplification, which is starting to create a flywheel effect across product and consumer engagement, all the way through commercial impact.”

In the second quarter, the brand connected its key looks — think polo shirts, Oxford shirts and chinos — with the personalities tied to big cultural events, like the Formula 1 Grand Prix in Miami, which made use of Tommy Hilfiger’s long association with driver Lewis Hamilton.

The approach has the influential people engaging with their own online audiences just when the eyes of the world are on them, driving engagement with the brand’s own channels and, ultimately, traffic in stores and online.

“We supercharge everything by connecting it all to culturally relevant global events to really cut through in the marketplace,” Larsson said. “This is a systematic and repeatable approach, but we are only just…beginning.”

Calvin Klein is doing the same with Blackpink’s Jennie Kim.

The reworking worked in the second quarter.

PVH’s adjusted earnings per share totaled $1.98 — 22 cents ahead of the $1.76 analysts projected, according to FactSet. And revenues for the quarter increased 3.5 percent to $2.2 billion with an 11 percent rise in the company’s direct-to-consumer business.

Investors approved and sent shares of the company up 1.92 percent to $82.37 at the close of trading.

Ike Boruchow, an analyst at Wells Fargo, noted this was PVH’s fourth-consecutive quarterly “beat and raise” as the company also boosted its annual outlook.

“PVH continues to outperform among peers with strong international presence despite some softness in North America,” Boruchow said. “Strong top line with margin expansion is a rare combination in today’s retail macro [environment] and clear indication that PVH’s strategies around supply chain, brand elevation and distribution are paying off.”

Boruchow maintained his $110 price target on the stock.

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