Dive Brief:
- PVH Corp. reported higher inventory costs in the last quarter, lowering the company's gross margin for the period — and an even greater impact is expected this quarter, CFO Zac Coughlin said on a Dec. 5 earnings call.
- The parent company of apparel brands Calvin Klein and Tommy Hilfiger saw inventory costs rise 3% year over year in the quarter ended Nov. 2, 2% of which was due to tariffs, Coughlin said.
- "As we discussed last quarter, the impact of tariffs will be felt much more heavily in the fourth quarter than the third quarter as more inventory sells through at the new higher rate," the CFO said.
Dive Insight:
Several retailers reported a spike in inventory costs due to shifting tariff policies implemented by the Trump administration this year. Gap, for instance, said tariffs largely accounted for a 5% increase in inventory for the quarter ended Nov. 1. To offset the levies, the company planned to make sourcing adjustments and targeted price hikes.
PVH expects to face a $65 million unmitigated impact from tariffs on FY25 earnings before interest and taxes, Coughlin said. In Q4, tariffs are projected to account for 150 of a 200-basis-point decline in gross margin.
"We have begun to mitigate some of these costs through strategic actions this year and expect to fully mitigate the impact over time," Coughlin said. "But for this year, some we will need to absorb."
Without tariffs, PVH's inventory costs improved significantly from the second-quarter increase, per Coughlin. Inventory costs for Q2 rose 13% year over year.
"Our inventory is fresh and current and well positioned headed into holiday, and we remain on track to land the year with inventory aligned to our sales plan, excluding tariffs," Coughlin said.
Because PVH pushed to purchase inventory for the next couple of seasons, the company is confident that “that metric will stay in a great place well into 2026,” Coughlin said.
