PVH Corp – Portfolio Update & Brand Positioning – 14
July 2021
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Daniel Wharton (DW)
Specialist:
Former VP, Sales at PVH Corp
Title:
Moderator: Nyree Hinton (NH), Third Bridge Sector Analyst
Agenda:
1. PVH (NYSE: PVH) portfolio update across key brands – Arrow, Calvin Klein, Izod and Van Heusen
2. Marketing spend amid domestic US recovery
3. Wholesale, retail and e-commerce strategic playbook
4. Licensing performance and market opportunities
Contents
Q: Could you outline the categories PVH plays in – whether that’s luxury fashion and accessories or another
definition – and the respective drivers?
3
Q: What were 2-3 pre-coronavirus trends within the industry? Did you notice any differences across
regions?
Q: Why do you think some players had poorly managed inventory?
Q: It seems to be an industry-wide problem where companies want strong brand affinity, but are too reliant
on volume and markdowns. How would you assess PVH’s ability to control that vs peers?
Q: Was PVH more vulnerable than any other luxury fashion or mid-tier luxury fashion player during
coronavirus, given the retailer-supplier relationship?
Q: How would you compare Calvin Klein’s strength as a mid-tier luxury brand around maintaining brand
synergy and pricing vs players such as Michael Kors or other companies under Tapestry? You mentioned
companies being forced to continuously mark down products.
Q: You mentioned the overall higher-fashion category pressure due to the seasonal nature of the business.
Are there levers or avenues through distribution or digital footprint that can be used to potentially come out
3
4
4
4
5
better than others vs sticking to a large wholesale strategy and being put in this tough position where
companies have to move product and make tough decisions because of margins?
Q: How would you assess big players similar to Calvin Klein and Tommy Hilfiger being able to keep up with
the younger consumer and innovate the categories or opportunities that you noted?
5
6
Q: Why do you think PVH was late to building out its digital infrastructure despite the closure of many malls
7
being a pre-coronavirus trend and notable growth from other D2C brands?
Q: Do you expect more brands to be aggressive in building out D2C and digital capabilities
Q: Why do you think PVH didn’t take more control over the retailer relationship by expanding aggressively
through its own D2C approach but not just through a digital footprint? Wouldn’t it make sense to prioritise
that over a wholesale business, where pricing is unfavourable and you have less control over the shopping
experience?
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8
Q: Would you say the industry now understands that the retailer relationship is not necessarily as
important? Where do you think it will go from here? Do you think it’s now time for legacy brands to
reposition themselves for a more D2C approach? How do you reposition brands such as Tommy Hilfiger and
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Calvin Klein?
Q: Do you think PVH and its portfolio brands have missed an opportunity to expand outside of their
demographic into areas such as athleisure and sportswear? Gap owns Old Navy, but has Athleta, which is
growing incredibly well. What are your thoughts on the company’s decision-making and failure to onboard
something different, new and more relevant?
Q: What are your thoughts on the licensing part of businesses such as Tommy Hilfiger, Calvin Klein and
PVH? How successful has PVH been in capitalising on licensing vs other players?
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Q: Brands are tied to their consumers and are known for their products’ legacies. That can also be diluted
with volumes. How can players such as Calvin Klein and Tommy Hilfiger stoke demand and what factors
play into that? Is it just about reducing volume?
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Q: How would you rate PVH’s ability to effectively communicate and drive its story with consumers? Do you
think it is being as aggressive as competitors in building out that capability and keeping the customer
engaged? Other companies have many marketing employees to focus on sustainability and are just far more
active in the marketing space.
10
Q: What are your thoughts on the international landscape? Plenty of brands who are struggling domestically
turn to other markets for growth. How sustainable is that growth? Are these players likely to face some of the
11
same domestic problems just at a later date?
PVH Corp – Portfolio Update & Brand Positioning
Transcription begins at 00:00:01 of the recorded material
NH: Welcome to Third Bridge Forum’s Interview entitled PVH Corp – Portfolio Update & Brand Positioning.
I’m Nyree Hinton, and I’ll be facilitating today’s Interview with Mr Daniel Wharton, former VP, Sales at PVH
Corp.
Daniel, before we get started with today’s Interview, please state I agree or I disagree to the following
statement: You understand the definition of material non-public information and agree not to disclose any
such information or any other information which is confidential during this Interview.
DW: Yes, I do. I agree.
NH: Could you provide an introduction to your background?
DW: I’ve been in the apparel industry for the last 35 years. The majority of it has been working with brands
and private brands of different retailers, and product development, primarily on them men’s side, but also
from time to time in the women’s and kids’ area. I’ve specialised in men’s bottoms, pants and shorts, for the
last 22 years and worked for different companies such as PVH, the Epic Group, which is a factory group out of
Bangladesh and Vietnam, and others like VF Corp and Levi’s.
[00:01:25]
Q: Could you outline the categories PVH plays in – whether that’s luxury fashion and accessories or another
definition – and the respective drivers?
DW: I categorise PVH as being more of a mid-tier in the luxury areas, when you consider Calvin Klein and
Tommy Hilfiger. There obviously is a much higher tier of luxury brands that are in upper-end speciality stores,
but the competition in these areas for Calvin Klein would be people like Perry Ellis and Hugo Boss, Armani
Exchange, Lacoste, people like that, that are contemporary lines that are focusing more on the 30-45-year-old,
slightly affluent man. Also for Tommy Hilfiger, they’re focused between the 30- and 50-year-old affluent
customer. Their competition is mainly Ralph Lauren, Michael Kors, Peter Millar, maybe Tommy Bahama,
those types of brands. The main drivers, of course, everything is top-driven. There are more wovens and knits
than there would be in bottoms. The knit classification is by far bigger than the woven classification right now,
so things like polos and performance pieces are key to their success. When you talk about Tommy Hilfiger,
which has developed itself kind of parallel with Ralph Lauren, then all classifications are in play, sweaters,
jackets, swimwear, all those types of components. When you talk about Calvin Klein, because it’s more
contemporary, it’s more into slacks, woven shirts, knits, lightweight sweaters and lightweight jackets and sport
coats.
[00:04:02]
Q: What were 2-3 pre-coronavirus trends within the industry? Did you notice any differences across regions?
DW: One thing that was very evident was there was a glut of product out on the floor. Pre-COVID, a lot of
stores were having trouble with their turns, just because they had under-performing stores and the market in
general was right-sizing itself. That caused a lot of glut in the market. Within that, you will get increased
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markdowns. The markdowns were escalated, they were taken quicker than normal. That is a big margin
erosion. Those two factors of having too many goods in there and then also having to go on sale quickly were
some of the pre-COVID industry trends that were happening at that time. It was pretty much across the board,
but you would have a lot of stores in high-metroplex areas that probably had too many doors to satisfy the
customer’s needs.
[00:05:32]
Q: Why do you think some players had poorly managed inventory?
DW: Several retailers were working with the fact that you can’t sell from an empty cart, so they would feel like
they would have to represent all products in all doors. There were obviously different tier stores with different
capabilities as far as what they could show, but the focus wasn’t on inventory. I know that stores like Kohl’s
were running at a pretty high inventory rate. Their sales were good, their margins were pretty well within
reason, but then they started looking at the carrying of inventory and realised that they were well above what
their needs were. Carrying inventory is a huge cost, so it gets away from you when you’re trying to hit number
and you’re not really pushing for a reduction in receipts. It’s a narcotic that you can’t wean yourself off of very
easily. You’re used to increasing your buys to increase your volumes, and at one point, there’s a time where
you’re going to see that you have too much inventory in order to satisfy your needs in volume. It’s a time where
all of a sudden you are in a panic to reduce your flow coming in, which is going to stack things up, and then
you also are trying to get rid of your existing inventory.
[00:07:26]
Q: It seems to be an industry-wide problem where companies want strong brand affinity, but are too reliant
on volume and markdowns. How would you assess PVH’s ability to control that vs peers?
DW: As far as how they control it, they are a good company on planning. They do try to stay within the means
of what they need in order to get their volume right. COVID had obviously a big effect on everybody, but I
think that PVH has implemented internally a lot of systems that will help them in managing inventory levels.
They are very sophisticated on their planning side and their flow of goods. As long as you can depend on sales
being there, which things are coming back and getting a lot better, then you can actually manage that a lot
better. There was more of a demand from the customer side that was putting the pressure on PVH to have
inventory and to be able to fill it that quickly. It wasn’t until PVH was working with a lot of their retailers and
holding the range back on a few things in order to keep from having the back-end situations they had, because
let’s face it, any brand right now that’s doing business with retailers, it’s really a real estate type of proposition.
They have a certain amount of racks on the floor that they have to maintain and the store is there at the end of
the season expecting you to make their margins correct, so pushing out more and more inventory in order to
hit a number and then reconciling at the end of the day is not a good scenario in order to keep your margins in
check.
[00:09:58]
Q: Was PVH more vulnerable than any other luxury fashion or mid-tier luxury fashion player during
coronavirus, given the retailer-supplier relationship?
DW: Obviously before COVID, PVH had an awful lot of decision making to be done. They had to reduce
headcount, they had to decide whether or not they were going forward on their outlet stores, things like that.
That’s a multi-headed monster when you’re talking about online business, retail business and then your
wholesale business. They felt like for some of their brands like Izod and Van Heusen, the more prudent thing
was to try to reduce the footprint on those brands, so they closed down their outlet stores, they tightened their
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relationships with retailers and they tried to update their online business. I don’t think that they were more or
less vulnerable to the situation, because I think everybody got caught in this situation. Can they weather the
storm? Yes, they can weather the storm. They’ve got multiple outlets in order to move product, they have very
desirable product with Calvin Klein and Tommy Hilfiger. I think their, they call it Tug, the underwear group, is
a big part of their business, so when things started happening with COVID, basics and basics from online
business became more important.
If you talk to retailers right now, when COVID started, people were staying home. They don’t need to have any
luxury brands at home, but they do need to have basics, the T-shirts and underwear and loungewear, and yoga
pants and all those types of things that were comfortable to wear and try to carry on your business on at home.
You didn’t need to put on a coat and tie in order to go conduct your business. That played into the hands of the
Calvin Klein underwear business. They had some advantages as far as classifications go. They had some
disadvantages, because a lot of luxury brands, when there’s no reason to go out, there’s no reason to buy
newness. All luxury brands, I think, suffered in that way.
[00:13:03]
Q: How would you compare Calvin Klein’s strength as a mid-tier luxury brand around maintaining brand
synergy and pricing vs players such as Michael Kors or other companies under Tapestry? You mentioned
companies being forced to continuously mark down products.
DW: There’s a lot more pressure now on brands like this than basic brands. You talk about within PVH, you
talk about Izod and Van Heusen, a huge bit of their business is replenishment. You don’t have to take the
markdowns as frequently. When you are in higher-fashion business, it’s more seasonal, and so you do have to
take your markdowns and you have impatient people at the top that see that something comes in and it’s not
selling that well for the first couple of weeks, and they’re more apt to put it on a markdown list when they’re
moving forward on the markdown cadence. How they compare to other brands, when you talk about retail
stores like Macy’s and mid-tier stores like Dillard’s, they’re all on the same path. They’re all looking at, “Is this
classification growing or is it having trouble selling through?” They get lumped into that. If you compare CK to
Perry Ellis, they compare pretty well at that level, because they’re all contemporary types of looks when you
talk about their sportswear.
When you talk about things other than that, like underwear and socks and accessories, they are kings of
replenishment business and keeping the hooks full and keeping the slots full, and that helps them an awful lot
as a brand. It doesn’t help them on the sportswear floor when they’re up against Psycho Bunny and Lacoste
and other brands like that, that are on the same path with them. There is a lot of competition for buy me over
them, but they’re all lumped in at the same place. You have to have enough customers that are contemporary
customers coming in the store, the demographics that you’re trying to cater to, and making sure that you have
the right price.
[00:15:46]
Q: You mentioned the overall higher-fashion category pressure due to the seasonal nature of the business. Are
there levers or avenues through distribution or digital footprint that can be used to potentially come out better
than others vs sticking to a large wholesale strategy and being put in this tough position where companies
have to move product and make tough decisions because of margins?
DW: There are a lot of variables out there that you have to be concerned with. Right now, there’s an awful lot
of right-sizing going on as far as retailers go. Door counts are coming down, people are going out of business
and you’re having to pick your partners. When PVH decided they were going to be selling Tommy Hilfiger to
Kohl’s, that’s a bold move. You automatically get more doors, but how does it affect your existing business?
The other part of the equation is that there are a lot of areas and classifications in the men’s side that are
changing. A lot of people, for many years, were wearing wrinkle-free pants that were cotton, post-cures that
Private and confidential 5
would come out with a crease all the time. That business is dying. It’s nothing what it used to be. If you go onto
the floors and you see people like Haggar and Dockers, it’s only a price game with them. They’re just
desperately trying to get somebody to buy something. I’ve said in meetings before, there’s really no reason for
a man to buy another pair of pants if this is the same thing that we’re looking at.
That spawned a newness and an opportunity to grow other classifications, to grow other types of businesses.
When you have businesses that are performance businesses, like the golf-inspired pants that are synthetic and
have properties to them, now you’re building a newer, better pant for that guy. He can wear these pants to
work, he can wear them to play golf, he can wear them out at night. It’s all acceptable. That Friday workwear,
everybody was so excited about when the khakis came on board, that’s the kind of excitement that they’re
getting right now on walking away from those khakis. That’s just one example of how all of the negativity that
was happening before COVID, when you come out of COVID, you have an opportunity to reposition yourself
or re-identify yourself, try to cater more to your demographics that you feel comfortable, that are going to
follow you and try newness from you. It’ll take the pressure off of you, and the fact that you’ll be able to splash
them with newness instead of trying to do the same types of things, maybe different patterns, maybe different
weights of fabric, you’re actually turning a corner and showing them something that’s going to inspire them to
change their wardrobe. Otherwise, why would you need to buy another Oxford shirt? Why do you need to buy
another pique shirt or a pair of khaki pants? This gives you an opportunity to capitalise on what’s going on in
the market. The niche markets that were there before developed this look for you. Now you have to capitalise
on it.
[00:19:51]
Q: How would you assess big players similar to Calvin Klein and Tommy Hilfiger being able to keep up with
the younger consumer and innovate the categories or opportunities that you noted?
DW: One thing that I think that they need to do, and I don’t know if they’ve implemented it yet, but the online
business has become huge. Anybody before COVID that didn’t buy online is buying online. You’re almost at
100% of people out there that are very comfortable making purchases online, and most sites will allow you to
return. You can try them on, if you don’t like them, you can return them. They’ll give you a sticker to return
them. It’s pretty easy. Everybody thought it was going to be complicated. How are you going to get a guy to
actually want to buy something online? I think somebody like PVH might have been a little bit late to the party
on trying to develop their online business. Prior to COVID, people like Kohl’s, around 20% of their business
was online, which is substantial when you talk about a 1,000-unit store. You’re doing as much online as you’re
doing in 200 doors. When you consider the overheads that you have and you look at the margin that you end
up getting at the end of the day, even if you have to take returns, even if you have to pay for shipping and
things like that, those are variable costs that you can probably get your arms around, more than if the
customer is even going to show up in your store.
Before, PVH had sites, they were hoping people would go to them because they were trained to go to sites, they
liked a certain brand, but I’m not convinced that they did that much as far as driving people to the site. With
things like Facebook and Instagram algorithms, it is a cost, but it’s better than some of the costs that you have
as far as overhead on your margin agreements and things like that that you have to do in order to play the
retail game. People going forward are going to realise that online business, if you’re a multi-level brand and
you’re selling to retailers and you’re online, and you may have your own outlet stores like they do, the big
growth area is going to be your online business. You don’t have to have a pop-up store, you don’t have to have
stores and hope that that particular day, somebody is going to walk in. You have already opened yourselves up
to millions more customers that you weren’t reaching before, that may not have an opportunity to walk into a
store and see your product. Now you have the ability, and if you are using the algorithms that are out there, if
you’re able to capitalise on that, to the point where then you would develop your own algorithms, then you can
actually start driving more people to your site.
Like I said, the COVID situation has done one positive thing for retailers, is that now people are quite
comfortable buying online. The reason Amazon has soared and can’t stay in stock in basics is because they are
the kings on driving people to sites and driving people into their products. That’s the best opportunity they
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have, if they’re looking at growth right now, is to strengthen what they’re doing online in order to be able to
capitalise on that.
[00:24:12]
Q: Why do you think PVH was late to building out its digital infrastructure despite the closure of many malls
being a pre-coronavirus trend and notable growth from other D2C brands?
DW: I will say that PVH has a great team for innovation and development of products, and they do have good
technology people. I would say that you’re getting pulled in a lot of directions when you’re trying to cater to
your customer and you’re having to pay to be on their sites and then you have to pay to be on your sites. I
think that sometimes you see the cost that’s involved in doing it the right way and, I don’t know, it can be
prohibiting, in order to go ahead and say, “This is what we’re going to do. Our main goal is to strengthen our
online business.” You have your online business and you pay attention to it, and you’re filling your orders and
you’re keeping up with it, but you’re also depending on retailers to drive people to your site. You’re putting
goods on their site and hoping that if they don’t see exactly what they want, they’ll come to your site. It really
caught a lot of people, because everybody’s focus was on the relationship with their retailers and making sure
the retailer got what they wanted, and if the retailer was asking for assistance online, then you were doing that,
because you thought it promoted your name. Everybody knows that it promotes the retailer’s name first and
then your name.
There’s a lot of cost that’s involved in it, and at some point, you have to say, “You know what? I think we can
do it better ourselves. I think we can represent our product better. I think that we can make it more inviting
for the customer,” and then you actually have to go out and start getting somebody to help you drive it to your
site. It’s a very tough thing for prestigious brands and companies to ask for help to do that. They feel like
they’ve got people in place that can do it, but there are a lot of things that have to happen in order to get people
driven to your site. I’m not criticising them. I know that they’ve tried to do it, but if your focus is on retailers
more than anything else, it does take a back seat. Like I said before, before COVID, around 20% was a good
percentage of business for anybody. With COVID, it’s going to be 50%. People are throwing numbers around
right now that are closing in on that, but people are now used to buying online and I think the last 18 months
have just strengthened that thought.
[00:27:59]
Q: Do you expect more brands to be aggressive in building out D2C and digital capabilities, given past
reluctance to be on trend? What other areas do you think will be vital to the success of retail that may not be
on everyone’s radar?
DW: I don’t have a crystal ball. I know that their business is coming around and people are doing better.
There are increases over last year, which last year was nothing, so people are feeling pretty good about that,
but there’s still a lot of right-sizing going on. The malls are still fighting to get tenants. There are a lot of empty
spaces out there and you have people that are mall owners buying stores like JCPenney. You really don’t have
merchants running it as much as you used to. How are they going to be able to turn the corner and make
things right? It’s still up in the air. I’m hoping that most of the blood letting has been done. It’s cost an awful
lot of doors across the country, but sometimes you say when you prune limbs, you have a stronger tree. That
could happen in this case. Then people discount the idea of the social part of going to shop. A lot of people
were going shopping before that just liked to shop and needed to get out of the house. You’d see families in
malls because it was an event for them to get out of the house and see what’s going on up there.
I’m not sure that they’re going not be able to capitalise on it just by retail. I think that they’ve got to do it
online. They’ve got to have different kinds of ways of stimulating the customer. If you go into a store right now
and something is on sale, the only time that you really pay attention to it is when it’s 50% off or an additional
percent off, things like that, and trying to drive through that way. When you go online, most sites that you go
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on, right when you’re the first time that you’ve hit it, they’re offering you 15%, 10%, something nominal that it
means something to you when you’re checking out, but they’re offering you a discount on anything you buy
that one time. You don’t really see that pop up much after that, unless they have some kind of 4 July sale or
something like that. You can control it a lot more differently online than you can physically in stores.
I know we’re off topic a little bit, but once you start that run to the finish line on the season, it’s just the clock is
ticking once you deliver product onto your floor. You’ve got it at one price that is inflated so much, nobody
wants it, but you have the margin that you need to start with in order to play the game of running it down to
zero. For most of these luxury brands, they don’t carry a lot of things over into the next season, so the clock is
ticking right away. Online, you can present it in a much more positive way than you can in retail. You can
change prices there every day if you want to. Most of these things are not going to show up at your house with
a price tag on it. Whatever you bought online, it’s going to be invoiced that way and sent to you on a packing
slip, so every day, you can do whatever you need to do in order to make sure that the margin is there. I know
that I roundabout was talking about the variables, but I think that people have to get their arms around the
newness of how to sell. It’s not just the same, “We need to convince our retailers to give us this many racks and
this is what we’re going to put on those racks, and this is what we hope to do at each price level.”
[00:33:04]
Q: Why do you think PVH didn’t take more control over the retailer relationship by expanding aggressively
through its own D2C approach but not just through a digital footprint? Wouldn’t it make sense to prioritise
that over a wholesale business, where pricing is unfavourable and you have less control over the shopping
experience?
DW: You’re talking about two companies that have been around for a long time. People think about Calvin
Klein and Tommy Hilfiger, they’re current, they’re up to date, they’ve maintained themselves as a luxury brand
for a lot of retail stores, but these brands have been around for decades. Tommy Hilfiger went through a whole
metamorphosis. They had been a premium brand, even higher-luxury brand. They went through some
troubles years ago, pretty much left the country and redeveloped themselves in Europe and then came back
and had to deal with Macy’s for a while. You have that relationship that is based on retailers, and a lot of the
brands have that DNA. The last 30 years, everything that they’ve done was really focused on, “How do we work
with the retailer in order to get our product out there in a positive way?” To all of a sudden say, “You know
what? We’re going to concentrate on ourselves and we’re going to promote ourselves online and you guys are
going to be secondary,” it’s really a tough pill for them to swallow, because again, your DNA is working with
retailers. It probably would have been better for them to concentrate on their own brands and trying to
promote them more digitally, but if you turn your back on the retailers, they have long memories and you have
to make sure that you maintain your relationships.
[00:35:31]
Q: Would you say the industry now understands that the retailer relationship is not necessarily as important?
Where do you think it will go from here? Do you think it’s now time for legacy brands to reposition themselves
for a more D2C approach? How do you reposition brands such as Tommy Hilfiger and Calvin Klein?
DW: It’s really, really difficult, because you’ve meant something out there to a specific customer. I’ll illustrate
this in two ways. Brooks Brothers has been an entity for a long time. They’ve been known for being high-end
suits, wrinkle-free shirts, ties, very beautiful clothes that they have at Brooks Brothers. The problem is nobody
wears a suit anymore. You go out to dinner and hardly anybody is wearing a tie. You used to be able to get on
an aeroplane and people were dressed up. Now everybody is in flip-flops and jeans and T-shirts. They meant a
lot to that upscale businessman, but there aren’t any of those anymore. Even on Wall Street, Wall Street is a
bunch of guys in a pit now. There’s nobody really dressing that much. When you go to a board meeting, things
like that, and if you go into a bank, you’ll find people that have suits on, but they meant so much to one
demographic, and when that demographic went away, they couldn’t do anything about it. They weren’t known
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for that.
They started doing a lot of casual business, they started doing twill pants and washed twills and garment-dye
twills, things like that. It became a part of their business, but it didn’t take over what they were losing on the
other parts of their business, the suits and the ties. The ties and dress shirts, that was big volume and it still
kind of is, because they’ll use their shirts as sports shirts, but if you talk to people on the floor on Madison
Avenue, they’ll tell you about the good old days when somebody would come and buy a dozen ties and a dozen
dress shirts. They’re still known for that. They couldn’t rebrand themselves to be anything but that. Same
thing with JCrew. JCrew had a customer that he liked a lot of casual shirts and broken-in twills, things like
that. When the trend changed, he wasn’t changing at the same pace as the customer so they became not as
cool. It happens with all those types of stores.
It’s like Banana Republic. You have the three stores in the Gap Corporation, Gap, Banana Republic and Old
Navy. The only one that does a lot of business is Old Navy, because they zero in on what the current trend is
and capitalise on it, and sometimes they decide what the trend is. It’s like if they decide that polar fleece is the
item that everybody has to have, when you come into Christmastime, all their commercials are talking about
Dad, Mum, everybody is wearing polar fleece. They are trend-setting or they’re capitalising on trends. That’s a
faster pace, and if you plan it, you can do it without having big margin losses, but if you had represented one
idea, one type of look and you try to be on the upside of that, the higher end of that look, and that look goes
away, you can’t all of a sudden change all of your stores and say, “Now this is what we are,” and that’s the
problem.
[00:40:05]
Q: Do you think PVH and its portfolio brands have missed an opportunity to expand outside of their
demographic into areas such as athleisure and sportswear? Gap owns Old Navy, but has Athleta, which is
growing incredibly well. What are your thoughts on the company’s decision-making and failure to onboard
something different, new and more relevant?
DW: I think they’ve got an excellent opportunity right now with what they’ve done recently. They sold off the
Heritage brand to Authentic Brands, so Izod and Arrow and Van Heusen, it’s going to be done under Authentic
Brands. Now PVH is Calvin Klein and Tommy Hilfiger, it’s an excellent opportunity to say, “This is the other
thing that we are. We now have the ability to splash everybody with something new.” It’s a lot easier to do
something the first time than to try to do it again later on. It’s that old saying that you have only one time to
make a first impression. They could splash on the scene with a brand new concept, and because they don’t
have the other brands that they thought maybe the Heritage brands were slowing down to the point where
they couldn’t afford to hang onto them, now you’ve rid yourself of that, you made the sale, now you have a
chance to come up with some kind of new type of imagery and new products and capitalise on the changes in
the market and make a splash that way.
[00:42:28]
Q: What are your thoughts on the licensing part of businesses such as Tommy Hilfiger, Calvin Klein and PVH?
How successful has PVH been in capitalising on licensing vs other players?
DW: PVH, and I don’t know, I haven’t been in any meetings in the last couple of years, but they went through
a process of buying back their licences. In a lot of cases where they had licences in other countries, they really
wanted to have PVH be a global brand, and so when the contracts were up, they just went ahead and let them
lapse. Some of them they worked with for a while in joint venture, but it seemed like that they wanted to be
wholly owned. Things like small leather goods and shoes and things like that that aren’t really their forte,
obviously they can do licensing for those types of products, but as far as licensing their brand in other
countries, if they wanted to do a classification that they didn’t feel comfortable with, I think that they are going
to be doing less licensing. This is just my opinion, that they were focusing pretty hard on having everything in-
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house, but like I said, things that they really don’t have a good handle on, like maybe it’s wallets and things like
that, they probably would have small licensing agreements for things like that, of if they wanted to do more
licensing even in the way of home products, sheets and towels and all of that kind of stuff. I know that that
licensing into things that aren’t necessarily sportswear could get your name all over the place, but I don’t know
if you can maintain that, because then you lose your identity a little bit.
[00:45:03]
Q: Brands are tied to their consumers and are known for their products’ legacies. That can also be diluted with
volumes. How can players such as Calvin Klein and Tommy Hilfiger stoke demand and what factors play into
that? Is it just about reducing volume?
DW: I think that you have a DNA and you try to stick with that as best you can, and that’s how some brands
get a little tired and their volume suffers. I think you have to identify your customer and you have to put a lot
of time and effort into understanding that customer. Then you’re going to have to just walk with him and her
down the path, because their taste levels are changing maybe a little quicker than you realise. That brings
more into knowing your customer, market research and really digging into what might be the next thing that
they are going to be wanting. You can chart out what their desire is now, what it was before, but you have to
always think ahead and project what’s the next thing. A lot of companies say, “This is what we are and this is
what we’re going to be, and we’ll tweak it a little bit and we’ll do different colours, and we’ll maybe do a couple
of different fabrics, but it’s still going to look like what we are,” and that’s okay when nothing happens.
Fortunately for companies like this, men don’t change that quickly. For years and years and years, there were a
lot of double-pleat pants out there, and then all of a sudden, people were like, “I really don’t like these pleats.
They just balloon out and they make me look fat,” so everybody started going to flat-fronts. It took probably 15
years to make that change. You sold a lot of double-pleat pants. They’re a little slow to change, but things are
happening now at a more brisk pace. Like I said, golf pants, a while back, were a big deal because they went
from going from cotton pants to synthetic pants, and the synthetic pants started getting performance aspects
on it in order to be able to be outside and play golf. People were like, “I love these pants. They’re fantastic on
the golf course.” There are not that many people in the grand scheme of things that play golf, but it spawned a
look and an idea to go after in the men’s sportswear area. Getting that inspiration and then running with it,
knowing your customer and projecting what you think that he’s going to want, you can still have your take on
it and it’ll lay down next to the rest of your products, but you’ve actually changed yourself and walked along
with the customer while he was changing.
[00:48:43]
Q: How would you rate PVH’s ability to effectively communicate and drive its story with consumers? Do you
think it is being as aggressive as competitors in building out that capability and keeping the customer
engaged? Other companies have many marketing employees to focus on sustainability and are just far more
active in the marketing space.
DW: You have to have your finger on the button of what’s hot, and right now, sustainability and recycling and
BCI cotton and all those things that are very important are the hot topics right now. People don’t realise that
over 10 years ago, Unifi came up with recycled poly. They were taking water bottles and extruding the plastic
and weaving it into fabric. Some of these things take an awful long time to do, but you have to be able to show
those types of initiatives in your advertising. Then how you advertise, print is pretty dead. Everybody loves to
say, “We’re in this magazine, this magazine.” Nobody cares about magazines anymore. Everything is online, so
getting the change in your focus and utilising the possibilities of how you can get things in front of customers
and what story you want to tell, it’s like when you get onto your website, you really have an opportunity to
romance your products.
Putting something in the store, unless you’re really lucky and you put all this good stuff into your product, you
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do recycled poly, you do BCI cotton, you’re doing organic cotton and all these things, and you put it on hang
tags and you put stickers on everything, you make it just incredibly obvious, if somebody picks it up, what’s
going on there. Most of the time, your store is full of clerks just to find somebody to check you out when you
find something you might want to buy. Online, you can really romance it. You can really tell a story, what
you’re trying to accomplish with this product, and I think when you put most of your efforts into that, it’ll pay
off an awful lot easier than what you’re doing with the retailer. You’ve got to do what you’ve got to do with
them, but you have a certain amount of rules you’ve got to play around with, and you’ve got to just hope that
somebody stumbles by your stuff. If somebody actually has come to your website, you have the opportunity to
really do old-fashioned selling, tell them everything that’s great about this product and all the things that you
did responsibly to get it done and how you pay attention to human rights issues and making sure that the
environment is being taken care of and all those kinds of things.
That’s really where you have the opportunity, and that’s the reason why I say that first of all you’ve got to drive
somebody to your site using the professionals that know how to do those. If you are a professional, then bully
for you, do it, have campaigns that will drive people to your site. I’m online an awful lot. I rarely see anything
for Calvin Klein and Tommy Hilfiger unless I’ve gone to their site and I’ve bought something. I get something
every day from Calvin Klein because I’ve bought their underwear. I didn’t get it because I went to another
underwear site and somebody picked up on that, that I was looking for underwear, I forget everybody else
that’s out there, but those are the algorithms that happen. I could go to Public Rec, which is a small capsule
line of performance sportswear, and the next thing I know, I’m getting ads from them, I’m getting ads from
Western Rise, Mack Weldon, all these other smaller, better speciality lines, I get them from all of those. I never
went on those sites before, but I’m getting information from all of those sites. You would think that if I go to
some of those sites, somebody would be able to say, “You know what? Maybe he’ll like Tommy Hilfiger,” but I
don’t get those, and I know it’s because you have to use the algorithms in order to drive people to the sites.
[00:54:07]
Q: What are your thoughts on the international landscape? Plenty of brands who are struggling domestically
turn to other markets for growth. How sustainable is that growth? Are these players likely to face some of the
same domestic problems just at a later date?
DW: It’s funny, you have companies like Abercrombie & Fitch. They had just an explosive business here for a
lot of years and everybody had an Abercrombie & Fitch sweatshirt. They sold them and sold them and sold
them, to the point where I really don’t need another colour of this sweatshirt. Business started turning down,
so they went to the Asian market and everybody started buying Abercrombie & Fitch sweatshirts, so it just
reinvigorated their business. Their volumes skyrocket. Let’s face it, there are more people in Asia than in the
US. That sustained them for a long time, but it didn’t really help them here. The damage was done. They didn’t
do anything other than some shorts and sweatshirts and things like that that the young customer likes, and the
young customer doesn’t stay young. Eventually he grows up and the new young customer doesn’t necessarily
want to have the same thing that the old young customer had. That’s a big problem when you go to Asia and
you have success.
I think the difference with CK, like I said, you see a lot of CK T-shirt and sweatshirts over in Asia, that’s a big
brand there, it’s clean, but you still see a lot here. If you have product that people want, then you can sustain it
here too. Before, with CK, they had briefs and they had boxers, and then they started developing other
products. They started developing boxer briefs and different types of T-shirts and things like that, that keep it
fresh enough here so you really weren’t experiencing a down-swing in your domestic market, but you were just
adding to your volume by going to other countries and offering them product. Same thing with Tommy.
Tommy, like I referenced before, they were a great brand. They started out just doing khakis and Oxford shirts,
and he has a good crest that he put on everything and people loved it, and then they started getting into more
and more stores and their system back there was, “We’re going to put something new in your store every
month.” It was great when everything sold out in a month, but then when it took a season to sell something out
and you had more goods coming in on top of it, then you were almost delivering things to be marked down the
next day.
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They needed to figure out, “How can we have a sustainable business that people would like and all we have to
do is keep it fresh?” That’s what they developed when they were in the European market. They could bring it
back here. They had a good story to tell, based on what was going on in Europe, and convinced Macy’s that
they needed to have their product. Macy’s was their showcase almost exclusively for years, and then that
opened the door for Asia. Enough people saw it here and it got to be a desirable, and they did it the right way
this time. They just focused on product and made sure that the product was right, that it could stand for a
season, or some of the basics could stand for more than one season. That became sustainable business that
they could move to Asia and just increase their volume that way. I’ve got to tell you, in some of the Asian
markets, they’ve added some product that is actually unbelievable as far as hand-feel and the textures of what
they’re using. I think that both Calvin Klein and Tommy Hilfiger are very clean brands outside of the USA, and
I think that they can maximise them even more when emerging markets start opening up again. We’re still
seeing some spikes in Asia from COVID, but I think that they’ll be just fine once everything opens up. They do
have a better story than people like Abercrombie & Fitch.
[00:59:24]
NH: We are now out of time, but let me close by saying thank you, Daniel, for your input. It’s a lot to unpack.
Thank you, clients, for joining Third Bridge Forum’s Interview today. If any clients would like to arrange a
private meeting or consultation, please contact your relationship manager. Have a good one.
DW: I appreciate it, and I’ll guess I’ll hear from you again maybe. Have a good day.
NH: You too, will do.
Transcription ends at 00:59:46 of the recorded material
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