Clothing inventory backlog: CK parent company forced to lay off 10% of employees globally
The American PVH Group is a clothing group that operates men’s clothing, women’s clothing, children’s clothing and footwear products. It was founded in 1881 and initially operated in a multi-brand direct sales model, including Van Heusen, Izod, etc. In 2003 and 2010, PVH acquired Calvin Klein and Tommy Hilfiger, and unified its brands into the Heritage Brands department. Heritage Brands currently owns brands including Van Heusen, Izod, Arrow, Warner’s, Olga, True&Co. and Geoffrey Beene.
The group recently announced in a news release that it plans to lay off 10% of its global employees before the end of next year to improve efficiency and reduce labor costs. The company said the layoffs will save more than $100 million annually.
PVH Group cut its forecast for this year due to lower sales and profits in the second quarter.
Revenue fell 8% year-on-year to $2.1 billion, with wholesale sales down 11%, Tommy Hilfiger brand sales down 5%, Calvin Klein down 1%, and Heritage Brands down 44%.
Gross profit margin fell slightly to 57.2% from 57.7% last year, while inventory increased by 19% and net profit fell 36.6% to $115.3 million.
Still, PVH beat many analysts’ second-quarter earnings expectations, which they attributed to tight cost controls. Now, the company is tightening its belt even more.
The group said an important part of the ongoing PVH+ plan is to increase productivity and invest in growth. So they are consolidating this work by streamlining the organization, implementing new ways of working and leveraging associated scale.
In fact, the performance releases of major brands have highlighted the problem of deteriorating consumption background, especially in the clothing category, where inventory growth has picked up, while unfavorable factors are still increasing. For example, the profitability of PVH’s two well-known brands is still far below pre-pandemic levels.
PVH executives readily acknowledged macro headwinds, mainly due to lower consumer demand due to inflationary pressures in the United States and Europe. However, as a clothing brand giant, it is natural to actively take action to save itself, focusing on relying on self-operated e-commerce websites and third-party online sales.
PVH executives highlighted the company’s strengths and said their “PVH+ plan” largely remains in place. The five-year strategy focuses on two of the best-known brands, Calvin Klein and Tommy Hilfiger, and relies on growing digital sales, both through the company’s own website and those of its retail partners, as well as in company-operated brick-and-mortar stores. . In the second quarter, direct-to-consumer sales, primarily from brand websites and stores, fell 5% year over year.
Including PVH and third-party online sales, e-commerce fell 7% in the quarter, but they didn’t feel too worried. Its chief executive said this year’s figures would reflect consumers in most regions returning to normal shopping after years of absence, including lockdowns at the height of the pandemic. We continue to expect digital channels to have the strongest long-term growth trajectory over the next few years across owned and operated and third-party e-commerce channels, with digital channels still accounting for approximately 25% of our revenue.
PVH now expects its 2022 revenue to be down 3-4% year-over-year, with operating margins around 9% considering the negative impact of reduced legacy brand business and the impact of geopolitics. The group’s preliminary guidance is to lift revenue by 2% to 3% and operating margin by 10%.
For such a big brand, PVH obviously has the brand strength and capital strength to recover from the impact of the epidemic. What is important is the adjustment and layout in the next few years. The key e-commerce digital channels are many luxury brands and DTC brands. Things to do.
VF Corporation plans to lay off 600 employees
On September 1, 2022, Beijing time, according to the US financial media Denver Business Journal, Steve, the president and CEO of VF Corporation, the parent company of fashion sports brand Vans, outdoor sports brand The North Face (North Face) and other brands, Rendle announced the upcoming layoffs in a letter to employees.
According to reports, Steve Rendle said in the letter that the layoffs are intended to “align our employee numbers and capabilities with our highest strategic priorities.”
Subsequently, VF Group confirmed that this round of layoffs involves 600 positions in the group. However, VF did not disclose the specific departments, regions and related businesses involved in these positions.
According to public data, as of the end of fiscal year 2022, VF Group has about 35,000 employees worldwide. The layoffs account for about 2% of the company’s current employees.
VF Corporation was founded in Pennsylvania, USA in 1899 and has a history of more than 120 years. The group is the parent company of well-known sports, leisure and outdoor brands Vans, The North Face, Supreme, Timberland and popular backpack brands Jansport and Eastpak.
According to the first quarter financial report of fiscal year 2023 released by VF Group at the end of July this year, VF Group’s revenue in the first quarter was US$2.262 billion (approximately 15.25 billion yuan), a year-on-year increase of 3%.
However, due to the weak consumer environment and inflationary pressure, the group suffered a net loss of US$56 million in the first quarter.
The performance of VF Corporation’s single brands is mixed.
Vans is still VF’s highest-grossing brand, with revenue of US$946.8 million, but a year-on-year decrease of 7%; at the same timeAlso underperforming was Dickies, whose revenue for the quarter fell 15% year-on-year to $170.4 million.
On the other hand, outdoor brand The North Face performed well, with revenue in the first quarter increasing by 31% year-on-year to US$481.1 million; Timberland revenue increased by 8% year-on-year to US$269.5 million; “other brands” including Supreme increased by 9% year-on-year to US$393.9 million Dollar.
In the Chinese market, affected by the epidemic, the Asia-Pacific region of the Chinese market closed 14% of its offline stores, with revenue of US$282 million, a year-on-year decrease of 20%, accounting for only nearly 10% of VF Group’s global revenue.
From a regional perspective, VF’s revenue growth this quarter was mainly driven by EMEA (Europe, the Middle East, Africa) and the Americas.
It is worth noting that in March this year, VF Group officially announced that Kevin Bailey will serve as the new global brand president of the Vans brand. Previously, Kevin Bailey was the executive vice president of Asia Pacific business of VF Corporation.
Vans and the Asia-Pacific region are precisely the brands and regions where the group’s performance in the first quarter was not as good as expected.
After the financial report was announced, Kevin Bailey said in an interview: “The sales of Vans’ classic styles have declined significantly. This is our core product, accounting for two-thirds of total sales. Therefore, in the future, our attention will be more focused on classics. In the sales business of styles. Another development focus is the Chinese market, which is an important market that all brands cannot give up.”
Steve Rendle, president and CEO of VF Corporation, also said: “Vans is still the brand that contributes the most to the group’s revenue.”
In June this year, VF’s emerging “growth army” The North Face also welcomed a new global brand president, Nicole Otto. Nicole Otto is mainly responsible for DTC business and brand digital transformation. She previously served as vice president of the digital department of Nike North America.
Judging from the latest financial report data, the revenue performance of VF Group’s wholesale channel is better than that of the DTC channel. In the first quarter of fiscal year 2023, VF Group’s wholesale channel revenue was US$1.263 billion, a year-on-year increase of 18%; DTC channel revenue was US$999 million, a year-on-year decrease of 3%.
According to VF Group’s latest expectations, by the end of this fiscal year, the group’s revenue will increase by 4% to 7% year-on-year. Among them, The North Face is expected to achieve double-digit growth, and Vans is expected to achieve single-digit growth.