Top apparel CEO explains why malls are ‘definitely not’ dead
2016 has been a difficult year for traditional retailers. With store closures picking up—at Macy’s (M) and beyond—there are consistent calls for the end of the shopping mall. However, one key retail CEO disagrees.
When asked if the mall was dead, PVH Corp. (PVH) Chairman and CEO Manny Chirico said, “No, definitely not.”
Chirico emphasized the importance of physical locations.
“I think you need to have an omnichannel presence,” he said. “Brick-and-mortar retailers have a big advantage over pure plays in that they can display their merchandise and offer their customers a lot more options. But I do think—no surprise—that you have to cut back on the number of stores.”
PVH, the $9 billion company behind Calvin Klein, Tommy Hilfiger along with Van Heusen, IZOD, and Speedo, gets 60% of its sales from wholesale, including department stores like Macy’s and Nordstrom (JWN) that have been struggling with changing consumer behavior. Nonetheless, his stock has risen 50% this year.
“There is a reality that we are overstored here in the United States,” Chirico said. “We have five times the number of stores per capita in the United States versus most of Europe and probably six to seven times that number in Asia…. We need to be flexible and target all those channels of distribution.”
Chirico added that for his business, store closures could be key to boosting profitability.
Brands such as Michael Kors (KORS) and Coach (COH) have spoken out about the impact of large department store promotions.
“This is a healthy thing for all of our key department store customers to be pruning back their portfolio…From a profitability point of view, these are their least profitable stores… And for us, they’re our lowest gross margin stores and where we are not the best presented so I think there’s a lot of positives that come out of this. We have to go through a bit of turmoil to get there but I think on balance, it’s not going to be a big topline hit for us at all and from a profitability point of view, it could actually be a positive.”
The key, Chirico said, is to stay one step ahead of the US consumer.
“The US consumer is the smartest in the world,” he said. “She knows value when she sees value so you have deliver against it. She also smells blood. When you walk into a store and you see the inventory piled to the rafters, she knows if it’s not on sale now, they’re going to be on sale a week from now.”
One key positive from the company’s second quarter report, he emphasized, is lean inventories across the industry, which will be key—especially if we get a reasonable, seasonal winter.
