PVH Corp. laid out plans on Tuesday evening to streamline its North American operations to better align its business with the evolving North American retail landscape, which has been accelerated by the COVID-19 pandemic.
The company’s actions include exiting its 162 outlet store Heritage Brands retail business and reducing its office workforce by approximately 450 positions or 12 percent. The North America office workforce reductions are across all three brand businesses and corporate functions and are expected to result in annual cost savings of approximately $80 million. The Heritage Brands retail stores are expected to operate through mid-2021.
“The structural changes occurring in the North American retail landscape have required us to take a hard look at our North American operations and identify where we can optimize costs across our business model,” said Manny Chirico, chairman and CEO of PVH. “As a result, we are making the incredibly difficult decisions to close our Heritage Brands retail business and eliminate a significant number of positions throughout our North American organization to align with the lower revenue base. We did not take these decisions lightly, as our Heritage Brands retail business is our oldest retail business yet no longer met appropriate return metrics. We would like to express our deepest gratitude to all of our impacted associates for their support, loyalty, and contributions over the years.”
Stefan Larsson, president of PVH, added, “While these decisions are always challenging, they 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. 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.”
The company expects to incur pre-tax charges of approximately $80 million over the next 12 months in connection with these actions, of which approximately $10 million is expected to be noncash. The remaining cash outflows are expected to occur over the next 12 months. The charges primarily consist of severance, lease termination costs, inventory markdowns, and non-cash asset impairments.
PVH Corp.’s Heritage Brands business includes the Izod, Arrow, and Van Heusen labels. PVH has over 40,000 associates operating in over 40 countries and $9.9 billion in annual revenues in 2019.