PVH Corp. announced additional actions it is taking to navigate the COVID-19 pandemic and its effects on its associates and the company’s business and financial position.
“We are doing everything in our power to best position PVH for long-term stability, while considering the impacts to all of our key stakeholders,” said Manny Chirico, Chairman and CEO, PVH. “We have been forced to take proactive steps to reduce our expenditures and preserve our cash position. While this is requiring difficult short-term decisions, we are confident that our actions will lead us to a stronger future.”
Reducing Costs and Expenses
The COVID-19 outbreak is impacting in regional operations in various ways. PVH Corp. addressing issues in each region as per health guidelines, government restrictions and local business conditions. To protect liquidity position, maintain our financial strength and manage the business, they have taken or are taking the following measures:
- Board of Directors compensation suspended: Board members will forego cash compensation for the duration of the crisis.
- Reduction of executive compensation: Manny Chirico, Chairman and CEO, has elected to forgo his salary while the crisis continues. Additionally, approximately 250 senior leaders and executives globally will experience salary reductions of up to 50%.
- Furloughs, decreased working hours and salary reductions in North America: In North America, which has PVH’s highest concentration of its workforce, PVH has commenced actions that will result in approximately 75% of store, office and warehouse associates being furloughed or having their working hours decreased. Furloughs will be unpaid and associates who have their hours reduced will have their pay reduced proportionally to their hour reductions. All remaining full-time associates will have a temporary salary reduction of 5%-20% depending on salary level. The Company will cover all associates’ share of medical benefit costs during the period regardless of situation.
- Salary reductions in Asia: With most stores in Asia reopened and operating with limited hours and reduced traffic, we are implementing temporary salary reductions for all office associates in the region.
- Governmental relief in Europe should mitigate payroll expense: Almost all stores in Europe are closed and office associates are working from home. PVH is pursuing governmental relief packages, including governmental salary subsidiaries, to retain associates and which would significantly offset payroll expense.
- Payroll savings in Australia: All offices and stores in Australia are closed by governmental order. Accordingly, almost all associates are furloughed. Country leadership is working from home and elected to forego compensation.
- Governmental relief in Brazil: All stores in Brazil are closed. The government is enacting legislation to help employers navigate the crisis through employee cost reduction. The Company is investigating its options in regard to governmental pay subsidies, working hour reductions and salary reductions.
- Other compensation-related actions: PVH has put all hiring on hold and will not make any merit increases to salaries in 2020. Additionally, payout levels for 2020 performance bonuses will be reduced by 50% when performance targets are established for eligible associates.
Additionally, previously announced cost and expense-reduction actions include:
- Continuing to review and eliminate or reduce all discretionary operating expenses, including a reduced marketing spend and a decrease in capital expenditures to approximately $190 million from $345 million in 2019.
- Tight management of inventories, with a focus on reducing its working capital through reduced and cancelled commitments, redeployment of inventory and consolidation of future seasonal collections.
- Working closely with its customers to manage its accounts receivable collections.
- Working closely with its vendors to extend payables with responsible purchasing practices underlying our approach, including offering inventory vendors the benefit of our vendor finance program that enables them to receive payments earlier at favorable market rates to assist their ability to navigate the financial effect on them of the extensions.
- The Company has a long history of successfully navigating and managing through economic cycles and turbulent uncertain times. The Company has taken the following steps to preserve liquidity and ensure the Company’s financial flexibility:
- Drew down $750 million from its over $1 billion revolving credit facility to add to cash balances, while maintaining untapped capital through its revolving credit facility.
- Suspended share repurchases under the stock repurchase program.
- Suspending its cash dividend beginning with the second quarter of 2020.
- Reviewing every opportunity to eliminate discretionary operating expenses, while reducing capital expenditures to approximately $190 million from $345 million in 2019.
- Sold its Speedo North America business to Pentland Group PLC, the parent company of the Speedo brand, for $170 million in cash, subject to a working capital adjustment.
Said Mr. Chirico, “Resilience has always been a strength of our company – and now more than ever, we need to be agile as we face a rapidly changing landscape. I am confident that our core strengths — our talent, our brands, and our strong fundamentals and balance sheet — will continue to support us through this uncertain time and ultimately lead us back to a healthy path of long-term growth once the pandemic subsides.”