To reduce labor costs, American clothing giant announced 10% layoffs

The American PVH Group is a clothing group that operates men’s, women’s, children’s and footwear products. It was founded in 1881 and has well-known brands such a…

The American PVH Group is a clothing group that operates men’s, women’s, children’s and footwear products. It was founded in 1881 and has well-known brands such as Calvin Klein and Tommy Hilfiger.

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 decline 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 boost 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.

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Author: clsrich