We believe in our brands. We seek to harness each brand’s power by producing products that reflect each brand’s unique identity and develop deep, enduring relationships with our consumers. Through our global platforms and heritage of operational excellence, our brands have the potential to capture market share around the world and create new opportunities for growth.
At PVH, our strategy is to take our powerful, iconic brands and maximize their potential and consumer reach while staying true to their unique brand DNA and core values. At the core of our success, and our opportunity, is the power of our global designer lifestyle brands, Calvin Klein and Tommy Hilfiger. By leveraging our regional operating platforms and strategically expanding these brands into appropriate product categories, channels and markets, we believe we can continue to grow our business profitably in the future.
Our acquisition of Warnaco in February 2013 was a significant milestone for our company and will allow us to expand the global reach of Calvin Klein and Tommy Hilfiger in the years ahead. Through the transaction, we reunited “The House of Calvin Klein” and gained direct control over Calvin Klein’s two largest apparel categories: jeanswear and underwear. The transaction has also broadened the global platforms for both of our designer lifestyle brands, enabling us to continue to transform from a primarily North American multi-brand business with strong European Tommy Hilfiger operations, to a more diversified, global organization with established operations in four geographic regions. Through the acquisition, our operations in Asia and Latin America have expanded significantly, and now represent over 20%1 of our operating income compared to only 12%1 in 2012.
We have made key strategic investments in our Calvin Klein business, including infrastructure, which are critical for our long-term global success. Our teams have converted systems across North America and Europe, putting associates on common platforms. In 2014, our teams will focus on systems conversions in Asia and our sourcing integration is on track for completion in Fall 2014. We also invested in people, filling many of the over 200 open positions across the acquired business, including a President of Calvin Klein Asia and a President of Calvin Klein Europe. The repositioning of our jeanswear business has been another focus area, and the Fall 2014 lines will reflect improved product and designs that are more consistent with our other Calvin Klein branded products. In conjunction with this, we continue to elevate our sourcing platform, enhance and upgrade our wholesale account distribution and retail presentation and focus on consumer engagement initiatives.
As part of our future strategy, we will continue to evaluate opportunities to buy back licensed businesses and joint ventures where we believe that we can leverage our core competencies to operate these businesses directly. Within Calvin Klein, we see this opportunity to include the international footwear, women’s apparel and men’s tailored businesses. At Tommy Hilfiger, there are opportunities over the long-term to take direct control of key markets, including our joint ventures in China and Brazil, as well as the licensed businesses in Southeast Asia and Mexico.
Many changes have been percolating recently in our Heritage Brands business, as well. The acquisition of Warnaco added the Speedo swim products and Warner’s and Olga women’s intimates businesses to our Heritage Brands portfolio. These businesses, like our other Heritage Brands wholesale businesses, are replenishment-based and generally provide consistent profitability and strong cash flows. We have also undertaken several initiatives to improve performance of the Heritage Brands business, including selling our G.H. Bass & Co. business in November 2013, in order to focus on our core competencies in apparel.
Across all divisions and brands, our focus remains on driving market share gains, expanding geographic penetration, preserving and improving operating margins and introducing new products. We are supporting these investments with integrated traditional and new media marketing programs that are intended to further the global appeal and growth of our Calvin Klein, Tommy Hilfiger and Heritage Brands businesses.
We operate three business groups: Calvin Klein, Tommy Hilfiger and Heritage Brands.
- Calvin Klein: Calvin Klein consists of two reportable segments – Calvin Klein North America and Calvin Klein International. Calvin Klein North America is operated from offices in New York, which oversee the United States, Canada and Mexico, with local offices providing support in Canada and Mexico. Our Calvin Klein International segment has several regional hubs: Europe, which is headquartered in Amsterdam; Asia, where our commercial operations are based in Hong Kong, Shanghai and Seoul; and Latin America, where we have an office in San Paolo, Brazil.
- Tommy Hilfiger: Tommy Hilfiger is comprised of two reportable segments – Tommy Hilfiger North America and Tommy Hilfiger International. Tommy Hilfiger North America is operated from offices in New York, which primarily oversee the United States and Canada, while Tommy Hilfiger International is operated from our office in Amsterdam, which oversees Europe, Africa, the Middle East and Asia.
- Heritage Brands: There are two reportable segments within Heritage Brands – Heritage Brands Wholesale and Heritage Brands Retail. These segments utilize our "heritage" brands – Van Heusen, IZOD, ARROW, Speedo2, Olga and Warner's, as well as numerous licensed brands. Operations are principally conducted in North America from offices in New York and Los Angeles.
+ Click to enlarge
We leverage a mix of wholesale, retail and licensing strategies that provide each of our owned brands with the opportunity to compete and succeed. We are also investing in and expanding our e-commerce capabilities, as we view e-commerce as an increasingly important distribution channel and means to connect with consumers. We sell our products online through our directly operated websites, as well as through third-party retail and e-commerce partners. Through our distribution strategy, we believe that we are able to achieve a greater reach geographically and a wider breadth and depth in product categories as we maintain our unwavering commitment to the image of our brands and the quality of the goods sold under them. We ensure the quality and delivery of our goods through world class sourcing and distribution capabilities.
We have continued to operate under our core business principles as we acquired businesses and grew organically, valuing leaders who hold the highest ethical standards, while also driving results. At PVH, we are genuinely committed to corporate social responsibility ("CSR"). CSR is a key consideration in making business decisions, as our company greatly values integrity and accountability. We have been promoting human rights and worker health and safety for over 20 years, and we continue to seek industry change through various CSR initiatives.
Despite the uncertainty that has impacted the global marketplace and the increasingly competitive retail environment, we have maintained a disciplined approach to managing and investing in our businesses, and we are optimistic about the strength of our brands, the strategic investments made in the acquired businesses and the opportunities created through the acquisition of Warnaco. We believe that these factors, combined with our passion, integrity, individuality, partnerships and accountability, will allow us to grow our brands while also delivering improved long-term financial returns.
We leverage our best-in-class global infrastructure, sourcing network, brand focused management and marketing teams to support each of our three business groups — Calvin Klein, Tommy Hilfiger and Heritage Brands — through a strategic combination of wholesale, retail, e-commerce and licensing operations.
We are a company transformed, focused on continued global growth of our world-renowned designer lifestyle brands. By leveraging our best-in-class platforms, which encompass wholesale, retail, e-commerce and licensing operations, we seek to further penetrate our iconic lifestyle brands across new categories, existing markets and new markets. We believe that we have multiple growth opportunities driving worldwide retail sales of our Calvin Klein, Tommy Hilfiger and Heritage Brands businesses.
We grow global brands. PVH leverages a diversified portfolio of brands – including Calvin Klein, Tommy Hilfiger, Van Heusen, IZOD, ARROW, Speedo, Warner’s and Olga — and markets them globally. Our operational expertise, dedicated team of associates and leaders, and commitment to each brand's core values, allow us to gain market share as we pursue new markets and product categories globally.