With global retail sales of approximately $8.4 billion in 2016, CALVIN KLEIN is one of the best known designer names in the world, offering provocative, modern designs. Our products are distributed through our wholesale partners and through over 2,800 retail locations (including company-operated, licensee and franchisee stores) across the world. Within the CALVIN KLEIN brand portfolio, CALVIN KLEIN 205 W39 NYC acts as a halo for the brand and offers inspiration to the other brands, which include CK CALVIN KLEIN (our contemporary line), CALVIN KLEIN (our master label), Calvin Klein Underwear and Calvin Klein Jeans. CALVIN KLEIN products are available through our wholesale customers (third party retailers, distributors and pure play digital commerce retailers that sell our products in brick and mortar stores and on digital commerce sites), at our own company-operated retail locations across the world, and online through our own digital commerce sites in the U.S., Europe, Brazil, China, Hong Kong and Macau. Additionally, in certain markets, our products are distributed through licensees (including joint ventures), franchisees and distributors.
Our Calvin Klein business consists of two reportable segments: Calvin Klein North America and Calvin Klein International.
Calvin Klein North America
Our North American operations, which include revenues generated in the U.S., Canada and Mexico(1), accounted for approximately 55% of our Calvin Klein reported revenues in 2015. Product categories that are distributed in North America include men's sportswear and dress furnishings, men's and women's jeanswear, underwear, outerwear, fragrance, accessories, footwear, performance apparel, women's sportswear, dresses, intimates, suits and handbags and items for the home. Products are sold by us and our licensing partners, through wholesale customers (in stores and online), through our own network of retail stores, which are primarily located in premium outlet centers, and through our own digital commerce operations.
Calvin Klein International
Our international operations accounted for approximately 45% of our 2015 reported Calvin Klein revenues (including revenues generated in the Asia Pacific region, Europe and Latin America). Internationally, our products are sold through the wholesale channel (in stores and online); our own network of retail locations (including concessions) under the brand names Calvin Klein Jeans, Calvin Klein Underwear, Calvin Klein Performance and CK CALVIN KLEIN; licensee stores under the brand names Calvin Klein Collection, Calvin Klein Platinum, Calvin Klein Performance and Calvin Klein Watch & Jewelry; and online through our digital commerce websites. Product assortments that are distributed internationally primarily include men's and women's jeanswear, underwear and accessories.
Calvin Klein's Asia Pacific operations accounted for approximately 20% of Calvin Klein's reported revenues in 2015. Our regional headquarters is located in Hong Kong, and we have commercial teams based in Shanghai and Seoul and satellite offices in Tokyo, Taiwan and Singapore, to support our business in major markets such as China, South Korea and Southeast Asia. We also own an interest in joint ventures in India and Oceana (which encompasses Australia, New Zealand and other island nations in the South Pacific). In these countries, we sell CALVIN KLEIN jeanswear, underwear, performancewear, accessories and CALVIN KLEIN apparel (Australia and India only) primarily through the retail channel, which includes concessions, shop-in-shops, retail stores (both full price and outlet) and travel retail locations, which are located in major international airports. Our retail portfolio includes approximately 330 company-operated retail stores and approximately 350 concessions. Additionally, we operate a wholesale business, through which we primarily sell our products to distributors and franchisees (currently approximately 1,100 doors), and in certain markets, including Japan and South Korea, we have a significant department store presence. Digital commerce is a key focus area, with our products sold through Tmall, jd.com and our directly operated CALVIN KLEIN digital commerce sites in China, Hong Kong and Macau.
Calvin Klein's European business accounted for approximately 20% of Calvin Klein's reported revenues in 2015. In these countries, we sell CALVIN KLEIN jeanswear, underwear and accessories, and a limited selection of men's CK CALVIN KLEIN apparel (primarily dress furnishings). Our store base includes approximately 150 retail stores (full price and outlet locations), approximately 480 concessions and approximately 115 franchisee stores. We also operate digital commerce sites across Europe, which have the capacity to ship to approximately 25 countries.
We continue to see a notable opportunity to improve the profitability of Calvin Klein’s European operations, as we build upon our efforts that were initiated in 2015 and were met with initial success. The largest CALVIN KLEIN product offerings in the region include Calvin Klein Underwear, which is experiencing strong performance, and Calvin Klein Jeans, where we are making investments and capitalizing on the halo effect and strong consumer appetite that Calvin Klein Underwear has provided for the brand. During 2015, we improved our sales and profitability of Calvin Klein Jeans products by investing in the brand, upgrading the product with enhanced designs, denim washes and quality, enhancing our store and shop in shop presence and improving our distribution.
Calvin Klein's Latin America business, which consists primarily of our directly controlled operations in Brazil, accounted for approximately 4% of Calvin Klein's reported revenues in 2015. We primarily distribute CALVIN KLEIN products through the wholesale channel (in stores and online), a limited number of retail stores and our digital commerce site. Products sold include CALVIN KLEIN jeanswear, sportswear, accessories, underwear and related products. We also see a notable opportunity to expand the CALVIN KLEIN "better" apparel and accessories distribution in the region. Additionally, we have been expanding throughout South America through a third-party licensee.
Calvin Klein has approximately 65 licensing and similar arrangements worldwide with third parties for use of the CALVIN KLEIN brands for a broad array of products, including women's dresses and suits, women's sportswear and performance apparel, men's tailored clothing, golf apparel, fragrances, cosmetics, eyewear, hosiery, socks, footwear, jewelry, watches, outerwear, handbags, small leather goods and home furnishings; and men's and women's CK CALVIN KLEIN apparel in Asia. Licensing revenues are included in the region in which they are realized.
Licensing continues to be a significant component of Calvin Klein's business, as approximately 55% of the brand's global retail sales in 2016 were generated from licensed businesses. Calvin Klein's two largest third-party licensees in terms of 2016 global retail sales are:
|NORTH AMERICA (1)||TOTAL STORES:||~200|
|EUROPE (2)||TOTAL STORES:||~750|
|LATIN AMERICA (3)||TOTAL STORES:||~110|
|ASIA PACIFIC (4)||TOTAL STORES:||~1,800|
With global retail sales of approximately $6.6 billion in 2016, Tommy Hilfiger, which is distributed in over 100 countries, is a global designer lifestyle brand. Tommy Hilfiger's essence is its classic American cool design heritage, and it occupies a distinct position as an aspirational, yet accessible, premium brand. Tommy Hilfiger offers a wide range of high-quality apparel, accessories and lifestyle products to a diverse consumer following. We design, market and distribute the Tommy Hilfiger, Tommy Hilfiger Tailored, Hilfiger Denim and Hilfiger Collection brands, and license these brands for an assortment of premium lifestyle products and in various countries and regions. Tommy Hilfiger products are available through our wholesale customers (in stores and online), our directly operated digital commerce sites, and our retail locations in North America, Europe, Japan and China; they are also distributed in North America, Europe, the Asia Pacific region and Latin America through licensees, joint ventures, franchisees and distributors.
Our Tommy Hilfiger business consists of two reportable segments: Tommy Hilfiger North America and Tommy Hilfiger International.
Tommy Hilfiger North America
Tommy Hilfiger North America(1) accounted for approximately 50% of Tommy Hilfiger's reported revenues in 2015. This includes revenues generated from the wholesale channel (in stores and online), through our own retail stores, our company-operated digital commerce site and licensing agreements.
Retail accounts for approximately 70% of Tommy Hilfiger's North American sales(2). This consists principally of sales generated from approximately 240 stores in the U.S. and Canada. Our store base primarily consists of company stores, which are located in premium outlet centers and carry specially designed merchandise at a lower price point than our other stores, as well as several full-price flagship and anchor stores. Additionally, we generate sales from our digital commerce site, tommy.com, which acts as an effective brand marketing tool and an e-commerce platform.
Our wholesale business represents approximately 30% of Tommy Hilfiger North America's sales(2). Macy's is the exclusive department store retailer for Tommy Hilfiger men's and women's sportswear in the U.S. and, in Canada, Hudson's Bay is the principal department store retailer. Both of these customers sell our goods in their stores and on their digital commerce sites. Additionally, we entered into an agreement with G-III for the design, production and distribution of Tommy Hilfiger womenswear in the U.S. and Canada, beginning in Holiday 2016. This agreement includes PVH’s current women’s sportswear business (which will continue to be sold in the U.S. exclusively through Macy’s) and additional categories, including suit separates, performance and denim (which can be sold through a variety of wholesale accounts, including Macy’s).
We view Macy's and Hudson's Bay as key partners in further shaping our North American sportswear strategy, and we are continually expanding the brand's presence in top doors at both department stores, maximizing sales of key items and upgrading the in-store experience by creating clear and impactful store presentations. Additionally, we license certain lifestyle product categories including eyewear, watches, dresses, fragrance and home furnishings, which are also sold at Macy's and Hudson's Bay, as well as through other retailers.
Tommy Hilfiger International
Tommy Hilfiger International accounted for approximately 50% of the business' reported revenues in 2015. Products are sold by us through the wholesale and retail channels in Europe, Japan and China(3); through joint ventures in India, Brazil, Australia and New Zealand; and by third party distributors, licensees and franchisees in Europe, Latin America and the Asia Pacific region. We also operate digital commerce sites in Europe, Brazil, Japan and China.
Tommy Hilfiger has well-established operations in Europe that accounted for approximately 45% of Tommy Hilfiger's reported revenues in 2015. The largest markets in Europe are Germany and Spain.
Across Europe, Tommy Hilfiger products are primarily sold through the wholesale channel, which represents approximately 60% of sales(2) – with customers ranging from large department stores to small independent stores. There are also over 600 retail stores (of which approximately 45% are company-operated, while the remainder are franchisee and distributor stores) and approximately 160 concession locations. Our company-operated store base in Europe consists of full price and outlet stores. Tommy Hilfiger's digital commerce operations are well-developed in Europe, as our directly operated European digital commerce sites are our largest and most profitable, and have the potential to ship to over 30 countries. Looking ahead, we see the largest potential to open additional retail locations in the Middle East and Africa (which is included within our European operations).
Tommy Hilfiger’s operations in Asia Pacific include its Japan and China businesses, which are owned; its businesses in India, Australia and New Zealand, which are operated through joint ventures; and its business across Southeast Asia, which is licensed to a third party. The Asia Pacific businesses operated through joint ventures and licenses generated retail sales of approximately $355 million in 2016.
In Japan, we operate approximately 150 stores. We are repositioning this business to align more closely with Tommy Hilfiger's premium position globally, by enhancing our distribution and product offerings. We are starting to see early positive signs from our investments and we look forward to seeing further improvement in the underlying business in the years ahead.
In April 2016, we acquired the 55% interest in the Tommy Hilfiger joint venture in China that we did not already own. We see this as a significant opportunity, as it allows us to directly operate in Tommy Hilfiger’s fastest growing market, while also leveraging our well-established infrastructure in Asia, regional leadership expertise and strong brand momentum across our Tommy Hilfiger and Calvin Klein businesses in the region. In particular, we see a large opportunity to grow our categories outside of men’s sportswear, including womenswear, kids’, tailored apparel and denim. We also believe that we drive growth through additional retail store openings and investing in brand marketing.
Our Latin America operations are showing continued momentum. Revenues in the region are primarily generated in Panama and Brazil. In Brazil, we have a joint venture with a local partner that was established in January 2013. Over the next several years, we plan to expand the brand’s presence significantly in the country, as we believe that Brazil is our largest underpenetrated market opportunity in the region. Tommy Hilfiger's store base includes approximately 210 full-price and outlet store locations in the region.
|NORTH AMERICA (1)||TOTAL STORES:||~240|
|EUROPE (2)||TOTAL STORES:||~780|
|LATIN AMERICA (3)||TOTAL STORES:||~210|
|ASIA PACIFIC (4)||TOTAL STORES:||~570|
With 2016 reported revenues of approximately $1.6 billion, our Heritage Brands business encompasses the design, sourcing and marketing of a varied selection of brand label dress shirts, neckwear, sportswear, swim products, intimate apparel, underwear and related apparel and accessories under the Van Heusen, IZOD, ARROW, Speedo, Warner's and Olga brands, and other owned and licensed trademarks. We also license our owned heritage brands for an assortment of products and in a number of geographic regions. We distribute our Heritage Brands products at wholesale, through our own Van Heusen retail stores, which are located in Canada and the U.S. primarily in outlet malls, and online through SpeedoUSA.com, as well as digital commerce sites operated by key wholesale partners and pure-play digital commerce retailers.
Our Heritage Brands business is comprised of several category offerings, which shown and detailed below.
Our Dress Furnishings business principally consists of the design and marketing of men's dress shirts and neckwear. We market both dress shirts and neckwear under brands including Van Heusen, ARROW, IZOD, Eagle, Sean John, Geoffrey Beene, Kenneth Cole Reaction, Kenneth Cole New York, MICHAEL Michael Kors and Michael Kors Collection. We also market dress shirts under the Chaps brand, among others. We market neckwear under the J. Garcia brand, plus an array of other licensed and private label brands, which comprise approximately 35% of our neckwear business revenues. These offerings are primarily sold to department, chain and specialty store customers (for sale in stores and online). To a lesser degree, our products are sold in higher-end department stores, such as Neiman Marcus, Nordstrom and Saks Fifth Avenue, and in mass market stores. Collectively, product offerings represent a sizeable portion of the domestic dress furnishings market; we had a greater than 50% market share in neckwear and an approximately 40% market share in dress shirts in 2015 unit volume in U.S. Department and Chain Stores combined. Recently, we have been focused on adding innovation and performance features to our products, including our successful launch of the Van Heusen Flex Collar shirt in Fall 2015. Based on positive performance, we are leveraging this feature to several of our other dress shirt offerings.
Our Heritage Brands Sportswear business also includes the design and marketing of sportswear, including men's knit and woven sport shirts, sweaters, bottoms and outerwear at wholesale, principally under the IZOD, Van Heusen and ARROW brands. Our products are primarily sold to department, chain, specialty, mass market, club and off-price store customers (for sale in stores and online), although we also operate approximately 170 Van Heusen retail stores, which are primarily located in outlet malls in the U.S. and Canada. While we continually look to close underperforming Van Heusen stores as leases come due, we plan to operate Van Heusen retail as a complement to the brand's wholesale operations and leverage its resources across the business, which we believe will help improve the brand's productivity. We have implemented strategic initiatives intended to improve performance, including multi-brand outlet stores that sell Van Heusen, IZOD Golf and Warner’s within one storefront, which has been well-received by consumers.
We design, manufacture and sell men's, women's and children's swimwear, pool and deck footwear and swim related products and accessories such as swim goggles, learn-to-swim aids, water-based fitness products and training accessories under the Speedo brand. Products are distributed in North America and the Caribbean through all major distribution channels, including mass market stores, sporting goods stores, team dealers, swim clubs, off-price stores, catalog retailers and digital commerce sites, including Speedo's SpeedoUSA.com digital commerce site.
Our underwear and core intimates offerings include intimate apparel, shapewear and loungewear under the Warner's and Olga brands, as well as underwear under the Michael Kors brand. Our objective is to leverage core competencies and best practices from across the PVH organization to enhance our products and assortments. This includes leveraging Calvin Klein Underwear's strong expertise in product, packaging and marketing, as well as capitalizing on Warner's reputation in bras and Olga's in fuller-figure sizing. Our underwear and intimates offerings are sold across a variety of retail channels, including department, chain, club, off-price and mass market stores (in stores and online).