Dive Brief:
- Apparel company PVH is targeting a 25% decrease in its inventory to sales ratio by the end of 2024 as supply chain improvements continue to accelerate, CEO Stefan Larsson said in a Q2 earnings call late last month.
- Inventory is up 6% compared to last year, CFO Zac Coughlin said on the call. The retailer expects inventory levels to be significantly lower in the second half of 2023 compared to last year, with continued improvement in 2024.
- The company, which owns brands Calvin Klein and Tommy Hilfiger, is aiming for the strategy to help the company better align inventory levels with consumer demand, “one of the highest value drivers in our business,” Larsson said on the call.
Dive Insight:
PVH is focused on building a demand and data-driven supply chain as part of the company's multiyear growth plan, according to a 10-Q filing.
One step the company took to strengthen its supply chain included naming David Savman as its new chief supply chain officer in July 2022. The change came at a time when the retailer was dealing with COVID-19-related inventory delays.
The change in leadership helped PVH’s supply chain team to work more closely with the company’s product creation teams. The closer collaboration led to product assortments with better planning and allocation, the CEO said on the recent earnings call.
Significant progress has been made in building an operating model driven by demand, Larsson told investors. Such progress is expected to not only improve PVH’s inventory to sales ratio in the coming years, but also improve on-time and accurate deliveries, shorten transportation lead times, and create more responsive production models and data-driven planning tools across its supply chain.
"Instead of running the business with too much inventory at any given time that most do in our sector”, Larsson said, “We're able to get [a] much better match between what we create, plan and produce [so that it] is actually much closer to what the consumer wants."
Other retailers are also reporting inventory improvements as supply chains normalize. Abercrombie & Fitch said its supply chain improved from 2022 as shipping times got better helping the company reduce inventories by 30% YoY in Q2. And earlier this year, Macy's made progress in leveraging data and analytics to better forecast sales demand, which led to improved inventory levels.
