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Stefan Larsson’s Simple Plan for PVH

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There’s one Levi’s. And one Ralph Lauren.

But Stefan Larsson, chief executive officer of PVH Corp., says he has two mega American brands in Tommy Hilfiger and Calvin Klein. And now, after serving a year as the group’s CEO, he has laid out his master plan for pushing those two businesses to their full potential.

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Part of that entails taking a page from the playbook of Levi’s and Ralph Lauren (which Larsson once led as CEO) and cleaning up distribution in the U.S. by reining in sales to the value channel. The company will also be adding a few full-price stores in key cities to give full expression to the brands.

But PVH+ — a multiyear plan to push revenues to $12.5 billion by 2025, up from $9.2 billion last year — goes beyond that, tightening up many aspects of the business and bringing a new focus.

PVH has already been simplifying and focusing in, cutting its Tommy Hilfiger and Calvin Klein stock keeping units in North America by about 30 percent since before the pandemic.

In an interview with WWD after the company’s first analyst meeting in more than a decade on Wednesday, Larsson described the sku rationalization as an “ongoing process.”

“It starts with being clear which skus do you start with,” he said.

That means focusing first on hero product or “the most essential product silhouette in the consumer’s wardrobe” and then building out from there, asking, Is this a hero product? Does it support a hero product? Is it a collaboration? Is it a test of something that might be a hero?

“It’s just being increasingly strategic,” Larsson said. “Every single product has an intent to build the best hero products over time.”

It’s a simple starting point for a simple plan.

Larsson broke it out into five pieces.

  • Product.

  • Consumer engagement fed by a digital-first, 360-degree approach centered around those hero products.

  • A digitally led approach with a holistic distribution strategy.

  • A demand- and data-driven operating model.

  • Driving efficiencies and investing in growth.

“I’m a big believer in simplify and clarify,” Larsson said. “The simplicity’s needed to execute successfully. I’m such a believer in identifying the key value drivers, working with one vision, one plan, getting the whole team around it. When you have that kind of simplicity, you can start to execute…We’re here to unlock the full power of Calvin Klein and Tommy Hilfiger.”

He said the most important part of executing on the plan was to “relentlessly focus on Calvin and Tommy, connecting them closer and closer [to consumers] and continually leaning into these five value drivers and learning and improving. It’s the compound effect of continuous improvements that will make this come to life over time.”

The rough outline of Stefan Larsson’s master plan for PVH has been clear for a while.

Since taking the reins last year — and before as president helping to navigate the early days of the pandemic — Larsson stressed the importance of brand, of product, of digital and of following consumers and meeting them where they are.

But at the investor day, Larsson pulled all those elements together to create a detailed plan on how the company will accentuate its strengths, overcome its weaknesses and pursue its next leg of growth based around Tommy and Calvin.

The plan includes elements from Larsson’s time at H&M as well as his stints as global president of Old Navy and as CEO at Ralph Lauren.

“We know that our job in the Americas is to unlock the business,” Larsson said, acknowledging that investors have been asking just how the company plans to do this.

The CEO was forthright in the challenges PVH’s brands have faced at home, but also noted that there is a proven approach to rebalancing distribution that has been successfully implemented by key competitors.

Before the pandemic, 30 to 40 percent of the company’s North American business came from tourists.

“That made it almost too easy to do business in North America,” Larsson said.

When those tourist dollars went away, he said, “it exposed a lack of focus on the domestic consumer. We had taken our eyes off of winning with the domestic consumer in a brand accretive way.

“Having turned around Old Navy, having helped reposition Ralph Lauren for much more profitable, sustainable growth, I’ve seen this movie before,” Larsson said. “The good news is that it’s fixable. There is a proven way to do this and that’s the way we’ll follow. It just takes time.”

Investors seemed willing to give PVH that time and gave Larsson’s plan the thumbs up, driving shares of the company up 6.8 percent to $81.79 in midday trading, for a market capitalization of $5.5 billion.

The meeting was held in New York, where Calvin Klein the designer held his runway shows, and Larsson — in a dark suit, white shirt with an open collar, referring only occasionally to notecards — said it was the perfect venue to introduce a “brand-led growth strategy.”

Larsson said he had always admired PVH and its Tommy Hilfiger and Calvin Klein businesses from afar.

“Those types of brands are not made anymore,” he said. “They are beloved by the consumer globally and they’re truly lifestyle brands and they have unique staying power.”

As CEO, Larsson has focused the business on those two main brands, having exited the Heritage Brands business, centering PVH on its strengths.

“When we share our growth plan today, we do it with a clarity and a focus of PVH being the global growth platform for Tommy Hilfiger and Calvin Klein,” Larsson said.

“Our focus has always been to position ourselves to win in the new normal,” he said. “We are convinced that we are already in the new normal. COVID[-19] just accelerated the underlying consumer and market trends.”

And winning in this new reality requires something PVH has — scale.

Larsson said one could start a fashion brand “in just a few hours,” but that very quickly new brands can get lost in all the “noise” in the market.

“Building the next Calvin Klein and the next Tommy Hilfiger has probably never been more difficult,” he said.

So the idea is to build and improve on the company’s iconic brands by sharpening product and marketing, amping up digital and focusing in on fewer skus, highlighting what makes the brands special.

“If you compete with anything generic, generic products, generic consumer experience, generic brands, you’re going to get crushed,” the CEO said. “The next-generation consumers are already here. Gen Z is already leading the market.

“We have the global consumer base, we don’t have to acquire that,” he said. “We have a consumer globally in all markets that love our brands. We have an omnichannel presence in the marketplace, digital [and] store relationships.”

Larsson underscored — “It’s a growth plan.”

And it finally unmoors the company’s traditional thinking about just where goods are sold and how it treats those various channels.

“We can’t look at distribution in silos anymore,” he said. “Our job is to be where the consumer wants to be to shop and then balance distribution between channels so we balance brand strength and pricing power.”

Larsson noted that while PVH comes out of the traditional fashion marketplace, he has the experience of being at H&M when the fast-fashion retailer grew from $3 billion to $17 billion in revenues and became a global powerhouse.

As he transitioned into running U.S.-based companies, he said the board members overseeing him asked often about the speed of H&M, but he said it’s a business model that doesn’t start with speed.

“It starts with a systematic and repeatable product engine,” he said.

That means producing products that consumers want, but not trying to run everything through the same supply chain, having a fast lane for trendy goods and a slower option for goods with a longer shelf life.

“It looks so simple, but it takes quite a lot of work to work differently and to change the mind-set,” he said.

Trish Donnelly, CEO of PVH Americas and Calvin Klein globally, drilled down on the North American business at the meeting, starting with the company’s brand power.

She said eight out of 10 men and nine out of 10 women recognize the company’s brands in America. Over 50 percent of women and nearly 60 percent of men consider the brands while they’re shopping.

For men, she said that’s a level of consideration that is outpaced only by Levi’s among PVH’s close competitors.

The task now is to make sure the brands are showing up appropriately.

Donnelly said the company in North America has relied too much on tourism and put too much product into the wholesale value channel. She said the company has also underinvested in its own e-commerce channels and its 200 factory stores.

That’s changing now, with plans to update the factory stores, selectively add full-price retail and evolve e-commerce, including through plans to double the company’s sales on Amazon, which has turned out to be a vital online partner.

Simple enough. Now Larsson and Co. just have to put it all together.

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