Fashion

Calvin Klein’s New Strategy: Don’t Market the Dream, Market What Sells

On the morning Calvin Klein released its collaboration with skate brand Palace, Stefan Larsson, chief executive of the brand’s parent, PVH Corp., received a text from his school-age daughter that was both worrying and exciting: “The Calvin Klein site crashed, can you get it back up?”

Demand for the collection of t-shirts, sweatshirts, jean shorts and underwear featuring the two brands’ logos was so strong out of the gate that it had briefly caused an outage on Calvin Klein’s web store. Some 70 percent of the apparel sold out on the day of the launch, in what Larsson told investors gathered at a PVH event in New York earlier this week was “the most successful collaboration we have done so far.”

The only sour note came from a few online critics and branding experts, who questioned whether bras and boxer briefs stamped with the alternating words “Calvin Klein” and “Palace” were the best expression of the two iconic brands’ sensibilities.

“In terms of communication and marketing … it was a very powerful campaign,” said Naomi Accardi, a creative consultant who has worked with Nike and Adidas. “But then when I saw the actual clothing, I didn’t really understand the point of the collaboration.”

For Larsson, who was appointed CEO of PVH Corp. last year, customers rushing the Calvin Klein website was the point. Speaking to a room full of investors at the brand’s 205 West 39th Street headquarters, where Calvin Klein himself held runway shows in the 1990s, the message couldn’t be clearer: the age of capital-F fashion at Calvin Klein is over and the era of the “hero product” is on.

“Is it a hero product? A test to be a hero product? A hero product we are phasing out?” Larsson said as he presented PVH’s five-year plan. “This is the disciplined framework we want to operate in.”

The strategy has helped Calvin Klein rebound from the pandemic, with sales of $3.7 billion in its fiscal year ending in January, roughly equal to 2019. PVH’s goal is to increase sales by 46 percent to $5.4 billion by 2025.

The Opportunity

The Palace collaboration represents the culmination of a top-to-bottom rebranding that cost Calvin Klein three years and hundreds of millions of dollars. Under Raf Simons, who served as the brand’s first — and potentially last — chief creative officer from 2016 through 2018, high-brow signatures and runway shows were aimed at the luxury customer who might spend $400 on a T-shirt instead of $40.

But the clothes didn’t sell as hoped. After Simons left, the brand abandoned the runway-as-marketing platform that it had revived from the 90s and focused solely on what they knew worked: selling underwear. By early 2020, Justin Bieber was posing in logo-stamped Calvin Klein underwear across a 4,000-square foot billboard in Manhattan.

Larsson joined in February 2021, succeeding longtime CEO Manny Chirico, who helped make both Calvin Klein and sister brand Tommy Hilfiger global behemoths. The company announced the exits of Calvin Klein’s global chief marketing officer Linh Peters and executive vice president Jamaal Layne in October 2021. Both spent less than one year in their respective roles. Calvin Klein has not appointed a global chief marketing officer to replace Peters.

Along with the new approach to product, PVH plans to focus on “consumer engagement” and “brand experience” meaning marketing moments and retail touchpoints that are consistent across the shopping experience. Calvin Klein is also planning to emphasise its own digital retail channels as well as the physical ones. Although it does not have any full-price retail stores in North America currently (it does in other regions), the brand operates more than 160 outlet stores in North America. The goal is to have “brand building” locations by 2025 in key cities, Trish Donnelly, CEO of PVH Americas, said during the investor presentation.

To Larsson, the hero products and the sales strategy are inextricably linked.

“As soon as you start to improve the product execution, you improve the customer engagement, you improve and enhance the store experience and it immediately pays back, the customer immediately responds positively,” Larsson told BoF.

The Product

Improving the product execution, as Larsson puts it, means iterating on Calvin Klein’s “hero products” like underwear, sweatshirts and T-shirts with trendy colourways and materials. At Tommy Hilfiger, the other powerhouse brand in the PVH portfolio, that means the brand’s best-sellers make up 80 percent of its assortment, with seasonal fashion items accounting for 15 percent and 5 percent dedicated to limited-edition collaborations. PVH declined to disclose whether that strategy will also apply to Calvin Klein.

It’s all about striking a balance between appealing to what customers already like about Calvin Klein and newness buoyed by fresh cultural moments that will keep the brand current.

“You don’t want to index too heavily on one side,” said Jacob Jordan, Calvin Klein head of product strategy and new product ventures. “It’s a fine line.”

The “centrepiece” of the Palace collaboration was a remixed unisex CK One fragrance, while the apparel was built around denim and underwear, two signature categories for Calvin Klein. Black and white basketball jerseys with the CK1 Palace logo and a pair of “CalVans” — Calvin Klein Vans skate shoes — constitute the most adventurous products in the collection.

Calvin Klein hasn’t entirely severed its links to the fashion establishment: When asked whether the brand would once again host fashion week shows, Larsson didn’t rule it out.

A previous collaboration came at the hands of designer Heron Preston in April 2021. (A second edition of the partnership came six months later, both of which Larsson said were successful.)

In February 2021, Willy Chavarria, who designs his own menswear label and also consults on the Yeezy Gap project, began work as senior vice president of design at Calvin Klein. Jess Lomax, previously at Nike, became the executive vice president of global design while Jordan built his career in part at Apple and Louis Vuitton. The first collections under Lomax and Jordan will be released for spring and fall 2022.

The Future

Where customers encounter Calvin Klein is likely to have as big an impact on the bottom line as who designs the clothes — if not bigger. The brand is still working to drive more sales from its own channels, preferably at full price, and less from wholesale retailers and off-price. Breaking away from unfavourable or even harmful wholesale relationships is a strategy other fashion brands have been trying to implement themselves, recalibrating to focus on their own e-commerce channels and stores.

“I’ve seen this movie before,” Larsson said of the focus on owned retail. “The good news is it’s fixable, there is a proven way to do this … It’s an approach our best competitors have done in North America — Levis, Ralph [Lauren], even Nike has had to rebalance their distribution and lean in to win the domestic consumer.”

PVH has a long way to go: sales from Tommy Hilfiger’s and Calvin Klein’s owned e-commerce channels in North America only made up 3 percent of revenue in 2019. A spokesperson for PVH said the brand did not report those numbers for 2020 or 2021. In the fourth-quarter earnings call for fiscal year 2021, Larsson said the company increased its digital business 30 percent in 2021 after achieving 40 percent growth in 2020 to account for 25 percent penetration of the business.

In part, that means building up its digital channels and only selling covetable collaborations like CK1 Palace on its own website and on the collaborator’s.

Denim, as seen in the CK1 Palace campaign, is also a priority for the brand. Calvin Klein can draw on its long history in the category: images of the ‘80s and ‘90s Calvin Klein denim ads starring Brooke Shields, Mark Wahlberg and Kate Moss are ripe for remixing.

“To tap back into the denim category, I think that’s really smart,” said Jessica Ramirez, analyst at Jane Hali and Associates. The jeans in those iconic Calvin Klein ads — straight leg and baggier styles — have themselves dethroned the skinny jean from its decade-long domination. “Everyone has been talking about that wider silhouette … Calvin Klein obviously has the fuel for that to play.”

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