PVH, with a strong start to the year, continues to reshape its leadership under CEO Stefan Larsson. The apparel conglomerate said overall first quarter revenue rose 57.5% year over year to $1.98 billion, with digital revenue up 95% (66% through its own websites). Compared to 2019, revenue fell 11.5%.
Wholesale revenue rose 53% year over year, in large part thanks to strength in Europe. Year over year, Tommy Hilfiger revenue rose 63% (flat compared to 2019), Calvin Klein rose 65% (down 12% compared to 2019) and the Heritage Brands business rose 9%, according to a company press release.
PVH swung into the black, reaching net income of $99.7 million, from its $1.1 billion loss a year ago; from 2019, net income rose 22%. Gross margin expanded to 59.1% from 49.5% in 2020, with expansion across regions and brands, and overall exceeding 2019, per the release.
Many apparel retailers have noted ongoing struggles in Europe due to continued lockdowns, with recovery in North America, where the pandemic is easing. For PVH in the first quarter, the opposite was true.
To some extent, given the drop in tourism, even the soft results at home originated overseas. Previously, tourists have accounted for 30% to 40% of North America sales, Larsson told analysts Thursday morning.
"We expect to see tourism come back gradually over time, although this is very much dependent on the pace of vaccinations in the rest of the world, and the loosening of travel restrictions," he also said, noting that during the quarter half of the company's Canadian stores were closed due to COVID restrictions.
That's likely to have consequences longer term, according to Credit Suisse analyst Michael Binetti, who suggested in emailed comments that there's more to the company's performance in North America than a dearth of tourism.
"We don't think that explains the full gap in US results in 1Q vs peers," Binetti wrote. "We think the US is in the early stages of a more significant US restructuring, and think PVH will use the majority of the upcoming Analyst Day to talk about reshaping the US into a smaller business vs pre-COVID revenues…with much higher margins."
Credit Suisse estimates that the company's EBIT margins in North America stood at just 5% or so, excluding licensing deals, and Binetti expects to hear plans for a smaller, more profitable U.S. operation with a higher contribution from the company's higher-growth, wider-margin international business. "We remain extremely impressed with PVH's international execution," Binetti said.
Whatever the company's plans are, they will be executed by new leadership. On Wednesday, the company announced an executive shuffle in the coming weeks. Chief Operating and Financial Officer Mike Shaffer will leave in September "to pursue other opportunities," and a search is underway for his replacement as CFO, according to another company press release.
Cheryl Abel-Hodges will step down as CEO of Calvin Klein in July, and will serve in an advisory position from July 1 through February next year, the company said. Trish Donnelly, a former Urban Outfitters exec who took the newly created role of CEO, PVH Americas in February, has had oversight of Calvin Klein since then and "will take full global leadership responsibility for the business," per the release.