Stefan Larsson on Pushing PVH Forward After Record Year
Stefan Larsson said he has the plan and the product at Tommy Hilfiger and Calvin Klein to take PVH Corp. higher — building off the strong gains from 2021.
Given the war in Ukraine, rampant inflation, continued supply chain trouble, the COVID-19 pandemic and the strong bounce back last year, that’s saying something.
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“We’re definitely seeing an unprecedented amount of macro, geopolitical volatility,” Larsson, who is chief executive officer of PVH, told WWD. “But underneath that we are very optimistic and confident about our strength.”
That confidence flows from the company’s two marquee brands and the results driven by the first full year under Larsson’s “accelerated recovery priorities” — focusing PVH on brand and product strength, supercharging e-commerce and back-end discipline.
In the fourth quarter, PVH’s net income totaled $390.8 million, or $5.53 a diluted share, and compared with year-ago losses of $57.7 million, or 81 cents. Adjusted earnings came in at $2.84, easily topping the $2 Wall Street analysts had penciled in.
Revenues for the three months ended Jan. 30 increased 16.3 percent to $2.4 billion from $2.1 billion.
That capped off what was a remarkable year for PVH — and the industry generally — with the consumer charging back strongly from the early COVID-19 lockdowns and spending more on fashion, particularly online.
For the full year, PVH logged net earnings of $952.3 million, or $13.25 a share, reversing most of the 2020 losses, which tallied $1.1 billion, or $15.96. Revenues for the year rose 28.4 percent to $9.2 billion from $7.1 billion.
Larsson noted the company also paid down $1 billion in debt, cutting leverage to below pre-pandemic levels while also driving its digital business up 30 percent last year on top of the 40 percent gain seen in 2020.
“We come into 2022 very strong,” the CEO said. “We are very confident in our ability to drive underlying double-digit top and bottom line growth.”
Like the rest of fashion, PVH is going to have to be quick and remain flexible as the global crises pile up on one another.
In addition to hitting pause on business in Russia, PVH is seeing supply chain back-ups disrupting sales in the U.S., COVID-19 restrictions impacting consumers in China and inflation seen rising an average of 10 percent across all its markets this year, with more impact in the back half.
“We have to lean in more to what is in our control than any time before,” Larsson said. “Brand will matter. Having a clear path to win and create value in these conditions is going to matter. Driving cost efficiencies is going to matter.
“When we put it all together, we see the strength in the business,” he said. “Underneath all that macro volatility is a very strong business and a very clear plan.”
That plan — particularly when it comes to gaining more ground with the domestic U.S. consumer — will become more clear when Larsson lays out his multiyear strategy next month at PVH’s first investor day in a decade.
“To win in the new normal will require a few things,” Larsson said. “The brands that stay closer to the consumer, to where the consumer is going, are going to win no matter how much macro volatility [there is].
“The new normal is not a static state,” he said. “The new normal that we see is that things keep evolving and the consumer keeps evolving and the macro [environment] keeps evolving and the ability to be fast and nimble and stay close to that consumer and to stay closer than your competition is really going to matter.”
In 2022, PVH is projecting revenue growth of 2 percent to 3 percent, translating into a 6 percent to 7 percent bump up in constant currencies. That includes a 2 percent hit resulting from the exit of the company’s Heritage Brands business as well as another 2 percent decrease attributed to a pause in the firm’s business in Russia and Belarus and fewer wholesale shipments to Ukraine.
Earnings per share are expected to come in at about $9. On an adjusted basis that equals $10.15, putting that measure of profitability on par with the go-go result in 2021. But EPS for the year is expected to show a 70 cent hit from foreign currency translation, primarily due to a stronger dollar against the euro, and another 65 cent hit tied to the direct impacts of the war in Ukraine.
That puts the underlying business on a course to double-digit gains this year.
To keep that up, PVH is going to have to keep sticking by the consumer, following them wherever they might go, including into the metaverse.
It’s a digital realm that fashion — including Tommy Hilfiger and Calvin Klein — is exploring, if not for the business potential today, for the future.
“The metaverse is something that’s getting incredibly important to the consumer and, therefore, it’s getting incredibly important for us to be present and test and experience and see where the consumer need and demand is,” Larsson said.
But he said the metaverse is in an early phase, much like e-commerce was not so long ago.
“It’s exciting because the connection between the physical world and the metaworld is going to be increasingly strong,” Larsson said. “We see it in terms of — the consumer and the young consumer and the next consumer is in a much more fluid way moving between the physical world and the metaworld and we have to as well.”
As if there wasn’t already enough to plan for IRL.
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