2022 Financial Results: Lululemon Got Local In China, While Calvin Klein, Tommy Hilfiger Made Global Waves

    China remains a key driver of the fashion industry’s long-term growth. So how did global players perform there at the end of 2022?
    Chinese buzzwords like Barbie Q and electric fish reflected cultural shifts, influencing society and trends to define China's evolving zeitgeist. Image: Unsplash
      Published   in Finance

    Few luxury and fashion brands posted financial results in December. However, those that did managed to perform better than expected, even as inventory levels remained inflated, product and logistic costs climbed, and the Chinese market faced ongoing challenges with lockdowns.

    In their call with investors, athleticwear giants like Nike and Lululemon highlighted the continued importance of the region to their long-term growth while others like PVH Corp. praised the power of consumer moments like Double 11. Will these names start the next quarter in China as strongly as they ended the last?

    PVH Corp.#

    Tommy Hilfiger made its long-awaited return to New York Fashion Week with a metaverse experience on Roblox. Photo: Roblox
    Tommy Hilfiger made its long-awaited return to New York Fashion Week with a metaverse experience on Roblox. Photo: Roblox

    At the end of November, PVH Corp. reported that revenue in the fiscal third quarter (ended October 30) fell 2 percent year-over-year to 2.28 million — ahead of expectations but still weighed down by Russian store closures and macroeconomic headwinds. According to CEO Stefan Larsson, “Our strong performance reflects the power of our two global iconic brands, Calvin Klein and Tommy Hilfiger, and the pricing power we are able to achieve by delivering strong hero product[s], engaging closely with consumers, and elevating the customer experience.”

    While the Asia Pacific region as a whole experienced nearly 30 percent year-over-year growth, China posted mid-single digit growth. This was driven by local product collaborations and a demand for underwear, “led by new silhouettes and functionality,” Larsson pointed out, as well as leveraging key consumer moments such as Double 11. During the November festival, both Calvin Klein and Tommy Hilfiger each achieved a record 10 million views on their livestreams and delivered a record 14.5 million (RMB 100 million) in gross merchandise value — results that should factor nicely into the next quarter.

    Globally, the two American icons boasted several highlights in Q3. Calvin Klein leveraged talents like Blackpink's Jennie Kim and HoYeon Jung to drive relevance in Asia while Tommy Hilfiger returned to New York Fashion Week with a phygital runway experience. Still, acknowledging the ongoing challenges, PVH Corp anticipates full-year revenue to be down 3 percent compared to 2021.

    Nike Inc.#

    After a tough few quarters, the sportswear giant is starting to turn things around. On December 20, Nike reported that revenue for the three-month period ended November 30 was up 17 percent year-on-year to 13.3 billion while net income was flat at 1.33 billion. In Greater China, its third-largest market by revenue, sales grew 6 percent on a constant currency basis, or -3 percent on a reported basis due to foreign exchange — a marked improvement from the 16 percent decline in the country last quarter.

    The sneaker leader had a record-breaking Double 11, ranking the No. 1 in traffic, livestreaming, and membership acquisition, according to CEO John Donahoe. To better capture local demand, the company continued to invest in technology and local marketing. In an earnings call, Donahoe highlighted the launch of a first-of-its-kind China-specific member journey with Tmall, its hyper-local product designs, as well as an increasing focus on local Gen Z and kids. “We’re confident in our ability to compete and win in this marketplace for the long term,” he said.

    It is notable that these results came as over 1,500 owned and partnered stores were closed at the end of November due to COVID-19. Given this strong performance, Nike raised its guidance and expects full-year revenue to grow low teens on a currency-neutral basis.

    Lululemon Athletica#

    Lululemon's wellness campaign in China included a 3D projection on the iconic Shanghai Broadway Mansion. Photo: Lululemon
    Lululemon's wellness campaign in China included a 3D projection on the iconic Shanghai Broadway Mansion. Photo: Lululemon

    Like fellow athletic apparel retailer Nike, Lululemon also topped Wall Street’s expectations. The company known for premium-priced yoga pants reported that revenue rose 28 percent to 1.9 billion and net income jumped to 255.5 million from 187 million year-over-year. This was driven by a strong holiday period, with CEO Calvin McDonald calling 2022’s Black Friday “the biggest day ever in our history in terms of revenue and traffic.”

    Revenue in mainland China grew nearly 70 percent, boosted by local activations. In particular, the company highlighted its month-long World Mental Health Day campaign, which included in-person wellness events and the launch of a digital well-being hub on WeChat. “All of this increases brand awareness, drives traffic to our stores and websites, and ultimately results in higher purchase consideration engagement with Lululemon,” commented McDonald.

    For the fiscal year 2022, Lululemon projects net revenue to fall between 7.94 billion and 7.99 billion. This will bring it a step closer to achieving its ambitious “Power of Three x 2” growth plan, which aims to double the net revenue of 2021 by 2026 via doubling men’s, doubling direct to consumer, and quadrupling international revenue. Nine new store openings in China, plus its recent expansion in Spain and France, should help the company move the needle on the latter goal.

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