The honeymoon is over. Last week, PVH Corp, owner of Calvin Klein and brands such as Van Heusen and Tommy Hilfiger, announced that it had missed analysts’ estimates for quarterly revenue for the first time in at least two years due to weakness in its Calvin Klein business.
Total revenue rose 7% to $2.52 billion, but below the $2.53 billion forecast. The company said, “while many of the product categories performed well, we are disappointed by the lack of return on our investments in our Calvin Klein 205W39NYC halo business and believe that some of the Calvin Klein Jeans relaunched product was too elevated – (read expensive) – and did not sell through as well as we planned.” Ouch.
This contrasted to just a few months earlier, August 2018, when PVH Corp. reported a 38% rise in second-quarter profits said to be helped by higher sales of its Calvin Klein and Tommy Hilfiger brands. PVH said at the time Calvin Klein’s sales rose 18 percent in the quarter.
This feels like a company prepping the market for Simons’ departure. I was sceptical when Raf Simons was announced as the Creative Director at Calvin Klein. He left Dior because of the workload, or so he said. Calvin Klein’s first overall brand director since the eponymous designer himself, Simons, came from the womenswear at Dior and gave the New York brand a high fashion and new artistic energy.
A brand long discounted, and known for masstige products such as perfume, underwear and jeans, elevating Calvin Klein was always going to take time and lots of money, and, in my opinion, was starting to work, albeit slowly. It changed somewhat back into a brand leader and a collection you did at least look at. Balaclava, anyone?
The parent company, PVH Corp, is said to have invested between $60 million and $70 million over the last three years. Emanuel Chirico, PVH Corp’s CEO, said much of it went to the premium 205 line. The company now plans to cut back on these investments. He said “we will be taking a more returns-oriented commercial approach to this important business. Second, we will shift the focus of our marketing campaigns going forward, as they have been too skewed towards our higher end ‘205’ line and the high-fashion consumer”. More Kardashians and less Sterling Rubys?
The problem with the 205W39NYC line – and it’s not only the name – is there is no retail network. With only a handful of stores – New York, Paris and Milan – the retail network isn’t big enough to generate the revenues. Wholesale is more for brand awareness, but if you’re going to make any luxury impact you need hundreds of shops on the best streets in the world, even in this age of online.
Luxury brands need to be seen and rub physical shoulders with the competition. For the Calvin Klein 205W39NYC label to grow this network, it would take years to complete and is ridiculously expensive. Clearly the parent company is waking up to this problem and seeing a disconnect between where all the money is being spent and where the sales are. The majority of Calvin Klein consumers probably don’t even know who Raf Simons is, or care.
The sales are in sexy basics – underwear, jeans and perfume. And that’s something Raf Simons doesn’t understand. He doesn’t do sexy. Even the model choices for the Calvin Klein runways were identical to his own eponymous brand; making the two look very similar. Calvin Klein is a brand built on sex and selling that by the truck load. As one of fashion’s licensing pioneers of the 80s and 90s, the brand rested on its laurels during the last two decades and didn’t really give a clear indication of where it was going and what it stood for.
Raf Simons’ Calvin Klein has, now, been labelled by its own parent company as “too fashion-forward”. This is not a good sign.
On a reported $18 million a year salary, Raf Simons joined in the summer of 2016. PVH Corp’s lawyers will, no doubt, be thoroughly looking at his contract again. We’re two years into the designer’s turnaround, and PVH Corp obviously wants to see fruit.
Simons has brought some welcome high-fashion to New York, but could a cheaper approach bring the same “halo” attention and financial rewards?
It will be interesting to see whether these strongly worded statements from the parent company is a public way of pushing him out. This may not only be the end of the honeymoon period, but the end of the relationship.