Former Chairman & Chief Executive Officer, PVH CORP
PVH Corp CEO: Star Of The Runway? | Mad Money | CNBC
The company is home to some of fashion's biggest brands, but the apparel space has been anything but easy to navigate.
About Emanuel Chirico
Emanuel Chirico, former chairman and CEO of PVH, discussed the company's response to the coronavirus pandemic and social justice issues in a June 2020 CNBC interview. He described the U.S. as being "ripped apart by systemic racism" and said PVH needed to improve in recruiting, training, and representation at leadership levels, stating the company would set "meaningful targets" within three months. Chirico also addressed inventory challenges, noting that 2020 would be "a mess" and that the company aimed to manage cash and inventory to be competitive in 2021. He mentioned that PVH had $1.8 billion in liquidity but had implemented furloughs and salary reductions due to shareholder pain. In earlier appearances, Chirico commented on trade policy and business performance. In December 2019, he said tariffs on apparel would result in higher costs for consumers and criticized the uncertainty of U.S.-China trade policy, noting that PVH had reduced its China sourcing for the U.S. from 35-40% to 10-15% over five years. In 2018, he described the business as the strongest he had seen in 25 years, with strong online growth and robust European performance. At a 2019 Concordia College event, Chirico said profitability was necessary for sustainability and that "made in America" was not practical for the apparel industry, arguing the U.S. should compete in high-tech robotics rather than labor-intensive garment production.
Transcript (29 segments)
✨ AI-enhanced transcript with speaker attribution
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Jim Cramer0:05
Apparel space, well it's been pretty tough in recent months, and few companies know this better than PVH. But you might recognize this: the copy mine Calvin Klein, Tommy Hilfiger, host of small brains. Here's the stock: that was nearly cut in half from its high of 120 last summer, down to a low of 64 just two months ago. Since bottoming in late January though, PVH has been roaring higher, climbing 37% from its lows up to 87 today at the close. A remarkable, although you could argue that the stock never should have maybe hit that low. People got too negative. Now we need to ask ourselves: can PVH keep running? The company just reported today and they delivered a 6-10 earnings beat off of $1.46 with higher than expected revenue, 7% on a constant currency basis. Numbers we've been stronger than the Cubbies' bullish pre-announcement back in February first that would have ever left you believe it. It is astonishing. While management was cautious with their full-year guidance for 2016, because they have a big international business and they expect the super freaking strong dollar to take a huge bite out of earnings. That makes you think this stock could be terrific to own, especially if, as I'd say, maybe the dollar is even poised to get weaker. So let's take a closer look with Manny Chirico, the Chairman and CEO of PVH, to find out more about the quarter and his company's prospects. Mr. Chirico, welcome back to Mad Money.
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Emanuel Chirico1:15
Hi Jim, nice to see you.
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Jim Cramer1:18
Have a seat. Many people are cheering this quarter, and I think one of the reasons why you have to is this number for Calvin Klein. It's astounding. How could you do 21%? What are you doing well?
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Emanuel Chirico1:31
I look, the brand is really performing exceedingly well. We have some tremendous marketing campaigns around the brand, and the product is just living up to it. It's being driven across the board, but underwear is leading the charge. Both men's underwear and women's intimate apparel is really driving the business.
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Jim Cramer1:48
So explain to me, Manny, versus a category that people have clearly felt has become challenged, what does Calvin Klein have that they don't have? Are you just in the right part of a power versus a princess? Victoria's Secret is good too, but these numbers, no one else has these numbers.
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Emanuel Chirico2:05
Well, I think there's a couple of things going on. The power space for sure is being challenged, particularly here in the States. We have a much bigger international platform, and we're seeing very strong performance in China, very strong performance throughout Europe in particular, and then our US business just continues to grow in a really difficult environment, particularly in the fourth quarter last year.
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Jim Cramer2:28
So you have just got better. Although I know you did also change your execution. You came on the show a couple times and said you were unhappy with the way that you were distributing Calvin Klein in Europe, so you fixed that.
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Emanuel Chirico2:41
Yes, sure. Right after the Warnaco acquisition, we took back the jeans and underwear business. We really turned that business inside out, not just know-how, right? And we changed the distribution, changed the customer base, and really refocused the brand to bring it to its premium positioning. So it's really starting to pay off today.
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Jim Cramer3:00
All right, let's talk Tommy Hilfiger. I mean, you know, it's overshadowed by how great Calvin Klein's doing, but Tommy put up pretty good numbers. I saw that you decided to take in the remaining 55% stake in Tommy Hilfiger China from the joint venture. How big can Tommy be in China?
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Emanuel Chirico3:13
Well, to put it into perspective, the Calvin Klein business is about $275 million in China. Tommy is less than half of that. And we've been experiencing significant growth with both brands. So I think there's a real opportunity to really take that business. I think both brands could be, in the next five years, over $500 million each.
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Jim Cramer3:33
Really? Yeah, what have you? Well, you know that market's growing, that consumer continues to spend. We're well positioned there, and both brands are really well received by the consumer in China.
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Emanuel Chirico3:43
Definitely.
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Jim Cramer3:44
Okay, center. You're bringing down debt $300 million, you're buying back stock, and you're expanding your square footage of company-owned stores. So how is it you are generating that much cash flow to be able to do all those things?
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Emanuel Chirico3:55
Well, sure, that's the beauty of the model here. For particularly Calvin and Tommy, but also our heritage businesses, they are just very cash flow positive. They don't require a tremendous amount of capital investment except the build-out of stores, which usually have a payback of anywhere from a year to two years. So fast, that fast, particularly the company's stores.
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Jim Cramer4:17
Even the fancy ones that you do?
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Emanuel Chirico4:19
Well, the fancy ones, those are our flagships. There's not much of a payback on those; they're a marketing investment.
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Jim Cramer4:24
Can I read anything through to the department stores? Maybe some of my no, Penny had a really good quarter, and you're very God foliated with Penny. I mean, that must be one of the standouts.
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Emanuel Chirico4:33
Yes, our Izod business in there continues to be very strong. Their business is very good in that mid-tier channel. After that, the Kohl's business for us has been very strong as well. So we'll have to see how that all progresses. And looking at the Calvin business at Macy's, it has just been phenomenal. It's really been driven both by the women's portion of that business as well as the men's portion.
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Jim Cramer4:58
Well, you're driving the bus then, because other than that, I felt that Macy's had just not been doing all that well. You must be the standout category.
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Emanuel Chirico5:05
Look, they're still the premier department store in America, and they are clearly dealing with some internal issues that they have to manage themselves. But I think with Terry Lundgren at the helm, they'll clearly put that back on track. And we've been a big part of their strategy, and they're a big part of our strategy.
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Jim Cramer5:26
All right, and across all really good. Say that again.
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Emanuel Chirico5:28
Well, I'll costs raw corsa, yeah. Royal courts are very good. As you agency with commodities, what's going on, the challenge really for us in that area is the strengthening US dollar, particularly on our foreign businesses.
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Jim Cramer5:42
All right, so we just have to talk one tough question. I mean, obviously Brussels and so business. I know some companies have had, you know, shut down for a couple of uniforms, and you have that terror attack. I mean, what does it mean in terms of your business, man? You don't want to minimize human life, but you also have to deal with business. What does it mean?
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Emanuel Chirico6:02
Well, first of all, you know, Europe for us is our second largest region besides the United States. We've got very strong businesses in that part of the world. And I think you have to just realize that you're going to have to deal with volatility and uncertainty constantly. It's, you know, we're going to solve that a few years ago in what we got.
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Jim Cramer6:24
Well, I'm just saying that this a terrorist absolutely, especially everything that's gone on. It's, you know, you have to build that into your business model. You have to be able to deal with the uncertainty.
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Emanuel Chirico6:32
The resiliency of people. All right, things have gotten like that. I was between you and me in the time that I've known you, you build it and you sure did. When I first met you, you know, the world is a changing landscape. And you know, look, the amazing thing is how resilient people are, how they keep getting up. You know, we were talking last time I was here about Paris, right? And I think now we're talking three months later about this. It's beyond me. But our teams, they just keep moving it forward and try to, you know, no one wants anyone to change the way we do business, to change the way we live our lives. And we're not going to allow that.
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Jim Cramer7:09
It's a great point to leave it. I want to congratulate you. This is a remarkable turn. I know that we had to, you always came home when it was tough, and now it's great that you deserve it. That's Manny Chirico, Chairman and CEO of PVH, with a terrific quarter. I thought conservative guidance, but that's the way you are. They have money back into the break. Thank you, Jim.
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Emanuel Chirico7:25
Thank you.
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Jim Cramer7:26
We are Jim Cramer here from there, buddy. Thanks for watching CNBC on YouTube. Click here to subscribe and get the jump with my exclusives with CEOs, market news, investing advice, and a whole lot more.