PVH
#I think the G-III ---+ actually in G-III sales you will really start to see it in the fourth quarter.
Holiday 2016 they will start shipping; I guess there will be some deliveries beginning of November as they set up.
I will leave it to them; I don't want to start talking about the business for them.
I know they are optimistic and enthusiastic about how they see that business.
I know the dresses hit the floor ---+ dresses are hitting the floor and women's suits are hitting the floor earlier and they are really feeling good about that portion of the business as it relates to Tommy Hilfiger.
But I think they report in another few days.
I think let them lay it out for you.
The transition really going smoothly.
The two companies have worked together very well to make sure from an inventory point of view there is no carryover merchandise that is going to negatively impact the business.
And really worked well with Macy's in particular and our other key department store accounts to make sure that transition is seamless and I am very confident about the way that is moving.
G-III ---+ what we are hoping for is what they have delivered in Calvin Klein over the last five to seven years that they will deliver for Tommy Hilfiger.
And really take a business that is a couple hundred million dollars and turn it into a $500 million to $700 million business, at much higher price points and at better margins.
You mentioned China, again this year with the transition and some of the amortizations and some of the accounting stuff that we have to deal with it is going to be slightly accretive.
I think that business will continue to grow.
I think we are going to ---+ I guess we are projecting it to grow high-single-digits.
There is an opportunity to do more than that but it is a question of how fast and quickly we want to move.
Clearly if you look at the size of the business, round numbers $140 million to $150 million business.
Compared to a Calvin Klein business it's at least twice as large.
There is clearly a footprint opportunity for us to grow.
And I guess just having the two brands under one roof, under one logistics platform, one operating platform the synergies should start to come towards the second half of next year in a bigger way.
So it will be a much bigger contributor to profitability next year as we move forward.
And it will be a big contributor to our top-line growth as well.
So I feel ---+ I really think that will be probably, without a doubt, it will be next year for sure, our highest operating margin business in the Company for the Tommy Hilfiger brand.
Very similar to how profitable our Calvin Klein China business is.
So as we look forward we are enthusiastic and I think it will be a contributor significantly to our top and bottom line.
I think, look, we have been pretty transparent about that Asia is the region that we continue to see the biggest growth and the biggest potential opportunity to take back license businesses and to operate businesses directly.
Clearly Korea will be a big market for us.
We believe Japan could be a market for us and Central and South East Asia which would include Hong Kong, Macau, Taiwan, so some pretty substantial markets as we go forward, which should be nicely profitable as we go forward.
The key in all of that is timing of license expirations, really working hand in hand with our strategic licensing partners who have really done a great job in building the brand throughout Asia.
The other opportunity will be Brazil, Calvin Klein has a very profitable business there that, despite the economic conditions in Brazil, continues to be close to a 20% operating margin business for us.
And it is about 25% ---+ the Tommy Hilfiger business in Brazil is about 25% the size of the Calvin Klein business in Brazil.
So clear growth opportunity there that we are doing with a strategic partner where we own a little bit over 40% of a joint venture and the ability there over time to bring that in-house will play itself out.
So clear opportunities there and that is really our focus area at this point ---+ the focus areas at this point as far as license take backs.
Look, I think that business, as you said, has been a real high performer for us, particularly over the last two years.
And then we are putting on comps on top of comps and we are comping on top of double-digit comps from last year and certainly [quarters].
As we look at it we continue to see opportunities.
The big improvement in our retail stores has been a very healthy women's business and I think that only continues.
If you think about the brand in Europe it is 65% to 70% men's versus women's.
And we all know how much larger the women's market is than men's.
So that opportunity keeps presenting itself.
The productivity in our stores continues to improve and a lot of it is being driven by the women's sales per square foot growing closer and closer to the men's productivity in those stores.
So the opportunity is there to continue this momentum and a big piece of it will be driven by the women's component getting better.
And as our men's tailored business becomes a bigger piece of the pie and we continue to get strong success there throughout Europe at a wholesale level.
As we bring that product category into the stores given the much higher price point it really does wonders for the sales productivity in the stores.
The margins are comparable to our sportswear apparel margins and footwear margins.
So clearly the opportunity there is to grow men's tailored in our stores and to grow the women's business in our stores.
And there is a lot of momentum behind those businesses.
So I don't think ---+ I think we will continue to see positive comps.
I can't talk about double-digit comp store increases, but I can continue to say we will continue to see momentum.
Europe seems much healthier as a market to us.
I know all of the headlines about Europe and what you see, but as far as the consumers being ---+ spending discretionary money, it is very healthy there.
I think the fact that the dollar has strengthened has only made our Europe ---+ the pressure that puts on our US business I have talked about.
The flipside of that is it really significantly helps our international businesses.
As people travel or people stay closer to home in Europe within Europe and buy when they are on vacation or on holiday, that has really been a big win for us as well.
So I think those trends will continue.
Thank you.
Next question.
Okay, two things.
Yes, to confirm, that was Europe.
Second, we don't give global order book because most of our businesses tend to be retail based, not wholesale based.
It's really ---+ it is misleading statistic I think.
And secondarily, in the US we never give order books because we just don't believe in laying that out given the fragile nature of orders in the United States.
So, there is a lot of momentum behind the business, nothing has changed but it doesn't make sense to call those out.
Sure.
On the Calvin Klein side, look, it is all product categories.
I don't mean to sound cavalier about it when I say it ---+ is the strength is across all countries, all major countries.
All product categories we are really seeing tremendous growth in jeans and underwear because they are the two largest categories.
But our accessory business is also performing very strong there.
We have just only recently launched men's sportswear and that ---+ the percentage there are very, very high but the dollars there are small as it starts to roll out.
And we haven't done anything with women's sportswear and apparel outside of genes and underwear at all.
So that is really a major opportunity for us as we move forward.
If we start to just match up from where we are positioned geographically in the United States or even in Asia where Calvin women's represents about 40% of the volume, there is a huge opportunity in Europe for that to continue.
Just to remind everybody, the European strategy first and foremost was to take a broken Warnaco jeans and underwear business that was in the wrong distribution at ---+ and still basically breaking even and, when you pulled out the bad distribution, was losing money.
Our European business today is healthy, growing.
You see the international numbers, you see the margins there.
So our European business is really contributing significantly.
If you use Tommy Hilfiger as a comparison, the Tommy Hilfiger business in Europe is three times the size of the Calvin business, it is the only region in the world where Tommy is larger than Calvin.
The profitability is 200 to 300 basis points higher and that has to do with scale.
And I think of those opportunities as the brand now has solidified ---+ the Calvin brand has solidified its position, has got a profitable foundation, the ability to take that forward and the enthusiasm that our wholesale partners have for the brand just gives us ---+ makes us just more optimistic about that this European trend can continue for the next three to four years.
Well I guess ---+ here is the dynamic, it is the stores we are talking about that are feeling the biggest pain from the international tourist market are also located in areas like Miami, Orlando, New York, Los Angeles ---+ that they are by far our largest stores and our highest profitability stores.
So I'd use as ---+ a comparison is the Macy's Herald Square is the most profitable department store in the world, I believe.
And it is being impacted by international tourism, but it is still one of the most ---+ largest most profitable department stores in the world.
And not to put ourselves in the same category as Macy's Herald Square, but these stores are our largest most profitable stores.
And I think this tourism will balance out.
I am not going to sit here and say it is coming back.
But I do think as we get through the third and fourth quarter this year it should level off and we will continue to have very profitable stores.
If you look at our retail profitability it is as strong as our wholesale profitability.
And you see how profitable our Calvin and Tommy North America businesses are, double-digit operating margins, very profitable businesses.
So this is a just a shift in sales trends and I think our European business is benefiting from that shift and our Asia business is to an extent, and our Latin America business is.
But the US retail business is just such a big component of our sales we just feel it directly here.
Okay.
Operator, we will take this as our ---+ the next question as our last question.
Thank you.
Well, I think there is two things.
I think fundamentally it is the two brands.
What we are really talking about is Calvin Klein and Tommy Hilfiger when we talk about all the momentum in the wholesale department store channels in the United States.
And I mean if you talk to most of all new stores, they will tell you how healthy the Calvin Klein business is, how ---+ continue to fuel growth beyond the women's side of the floor or the men's side of the floor.
So I think we do have with the Calvin brand in particular a lot of momentum behind the brand.
We have been able to take advantage of some of the weakness with some of our competitors to grow square footage and to gain market share in that channel.
So I think we are outperforming.
We have positioned ourselves and I don't believe we have overextended our brands in that channel of distribution.
Where other players have talked about that they have over exposed and over ---+ we have been continuing to grow, but I think we have been doing it in a very healthy way.
We are in categories that department stores really are focused on growing, women's and men's, and we have been a solution in both of those areas.
With the Tommy brand with Macy's it continues to perform very well for us on the men's side of the floor.
And now with the G-III initiative Macy's has really gotten behind the brand and thinks it really can make up for some of the market share losses that they have had with other brands.
So I think we are ---+ I think we have been better positioned.
We know where we play in the US and understand that market positioning and it has worked for us.
Even in difficult times like last year's third and fourth quarter our two brands really outperformed the competitive set.
And I think that is what is paying off for us now as we move forward.
I hope that explains it.
And with that we are going to close our call.
I thank everybody for their attention.
We look forward to speaking to you in December about our third-quarter results.
And I wish everybody a great Labor Day.
Have a nice day.
Thank you.
