Calvin Klein, Inc. (a wholly owned subsidiary of PVH Corp.) on Thursday announced a new strategy to bring digital operations into focus that entails “streamlining its North America division” and includes new branding for its CALVIN KLEIN 205W39NYC business.
That includes closing its 654 Madison Avenue store in spring 2019. "The company is evaluating options for future retail locations, and will also be unveiling new consumer experiences both online and offline," according to a company press release.
The announcement follows the brand's breakup with superstar designer Raf Simons, who left his position as Chief Creative Officer in December, and PVH's post-holiday report, in which it says it "expects revenue in the fourth quarter and full year 2018 to be at least $2.40 billion and $9.57 billion, respectively, which is above its plan."
Even before PVH and Calvin Klein parted ways with Simons, there was "clear messaging [from PVH management] on the 3Q call that they were not pleased and would plan to implement changes," Instinet analyst Simeon Siegel noted in comments emailed to Retail Dive Friday.
In November, Chairman and CEO Manny Chirico told analysts that the "more elevated fashion forward product at higher price points, particularly with our jeans re-launch ... did not sell through as well as we planned, resulting in more promotional sales and higher overall markdowns," according to a transcript from Seeking Alpha. He did also express confidence "around Calvin Klein's long-term growth opportunities," adding, "From a brand health perspective, Calvin Klein remains extremely strong."
As Siegel points out, however, that long term will include alterations. In a statement on Thursday, brand CEO Steve Shiffman said that a "historic transformation in consumer behavior" is prompting the changes, but "presents a significant growth opportunity as we look to grow the brand to $12 billion in global retail sales over the next few years."
It's "a clear shift in focus," Siegel told Retail Dive in an interview. "Companies rethinking their retail strategy is nothing new, so all stores are being reexamined, particularly stores that cost a lot to operate. There are no sacred cows — and the argument for using stores for marketing, while that still exists, is not as much of a slam dunk."
Calvin Klein, as one of America's premier fashion brands, has a difficult set of questions to tackle as it sets a new course. "Here's the thing to keep in mind: Calvin Klein is one of the largest brands in U.S. history, and that's an accomplishment," Siegel said. "It's fair to ask, when you are that large, 'Is the opportunity to grow larger or is the opportunity to grow healthier?' That's a tough question to ask."
The new strategy also involves job cuts, including a consolidation of operations for the men's Calvin Klein Sportswear and Calvin Klein Jeans business; "a new name, design approach and creative direction for CALVIN KLEIN 205W39NYC;" accelerating the pace of fashion introductions; installing a new "Consumer Marketing Organization" to elevate the customer experience; and integration of the Calvin Klein retail and e-commerce teams "to create an omnichannel approach mirroring how consumers browse, shop and purchase today," according to the release.
Downsizing, as with recent efforts by Michael Kors, Ralph Lauren and Coach to stick to more upscale customers, can be a boost to a brand and to growth, Siegel said. "Sometimes shrinking to grow can create healthier stories," he said. "Clearly they are trying to figure out how to reignite growth, the success of which remains to be seen."