PVH Corp. on Tuesday said it will permanently shutter its 162 Heritage Brands outlet stores by mid-2021. The brands with company-run stores are Izod, Van Heusen and Warner's, according to the company's 2019 fiscal year summary. The company's Tommy Hilfiger and Calvin Klein retail stores aren't affected, a company spokesperson told Retail Dive in an email.
The company will also cut 450 positions or 12% of its workforce, according to a press release. The company expects the workforce cuts to save $80 million annually.
PVH expects the changes to cost about $80 million in pre-tax charges over the next 12 months — mostly severance, lease termination costs, inventory markdowns and noncash asset impairments — about $10 million of that is expected to be noncash.
The brands in PVH's Heritage portfolio, by the company's own description, all feature mid-priced apparel, which has been particularly challenged in a market where the middle class continues to be squeezed.
In addition to Izod, Van Heusen and Warner's, PVH's Heritage brands include Arrow, Olga and Geoffrey Beene, as well as lingerie pure-player True&Co.
Despite the low penetration of retail in the portfolio — 83% of revenues last year came from wholesale, per the fiscal year summary — PVH President Stefan Larsson in a statement said the moves "are strategically important for the long-term health of PVH."
"The COVID-19 crisis is dramatically reshaping the retail landscape in ways that we believe will be long-term in nature and far-reaching in terms of consumer purchasing behavior," he also said. "We are adapting our businesses and rebalancing our cost base to improve our competitiveness and financial profile and, where appropriate, are reallocating resources to our businesses that drive greater returns. We continue to focus on delivering sustainable, profitable long-term growth for all of our stakeholders, and we will continue to advance our business by looking for additional efficiencies."
Indeed, expect more such adjustments from the apparel conglomerate, according to BMO Capital Markets Managing Director Simeon Siegel. The exit from retail won't help PVH much with long-term growth, however, but "will simply shrink an underperforming part of the business without elevating the remainder," he said in emailed comments.
"The paradigmatic brand-builder, PVH deserves much credit for what it achieved with Calvin Klein and Tommy Hilfiger, growing them into two of the largest brands in history," he also wrote in a July 14 note. "That said, we believe CK has reached a revenue peak and could benefit from a greater focus on profits vs sales."