Mark Wahlberg's underwear and Brooke Shields' implied lack thereof made everyone aware of Calvins. From its men's briefs to its haute couture, Calvin Klein is known for clothing, as well as fragrances and accessories, that are all about attitude. It designs all products and makes its ready-to-wear collection of women's and men's clothing; most of its profit comes from licensing the Calvin Klein name for items such as shoes, jeans, underwear, hosiery, watches, bedding, tabletop products, and furniture. Calvin Klein owns or licenses namesake stores worldwide. The company was founded in 1968 by Barry Schwartz and designer Calvin Klein, who were its sole owners until clothing maker PVH bought the company in 2003.
Calvin Klein's operations are divided into two businesses: About 60% of sales are generated through Calvin Klein Apparel, which comprises the company's dress furnishings and men's sportswear businesses, and Calvin Klein's 115 retail stores. Remaining sales are attributable to Calvin Klein Licensing, which generates strong earnings by managing licensing agreements with third parties, as well as the men's and women's wholesale apparel and New York City retail flagship businesses.
One of the keys to Calvin Klein's success is that it maintains control over its product design, development, operations, and advertising, created in-house by CRK Advertising. In addition, PVH owns Confezioni Moda Italia (CMI). Acquired in 2008, CMI is the licensee of the Calvin Klein Collection apparel and accessories business. The preference to preserve and control the brand comes at a cost, however. In 2011 PVH spent more than $300 million to advertise and promote the Calvin Klein brands sold by itself, its licensees, or authorized users of the brand.
Across the company's three Calvin Klein brands (Calvin Klein Collection, ck Calvin Klein, and Calvin Klein), the company holds some 60 licensing and other agreements that cover more than 130 territories outside the US. Products are sold worldwide under the Calvin Klein brand names; all told, the designer brands generated $7.6 billion in revenue in 2011. About 40% of its royalty, advertising, and other revenue in 2011 was generated domestically, while the remaining 60% came from international partners.
In 2011 PVH reported approximately a 12% and 15% jump in revenues from Calvin Klein Licensing and Calvin Klein Apparel businesses, respectively, over the prior year. The increases fueled an 8% year-over-year rise in operating income attributable to Licensing and a 20% rise from the Apparel business. Results reflect the continued opening of freestanding stores coupled with expanded distribution of the Calvin Klein Collection label. The ck Calvin Klein brand has extended its reach, particularly in Europe and Asia, and offerings, including watches, jewelry, and fragrances. Presenting the largest growth opportunity, the Calvin Klein white label garnered additional licensing deals for new product lines, such as Calvin Klein Jeans men's and women's footwear, children's footwear, and eyewear, along with an extension of Calvin Klein Golf into Asia.
To maintain momentum, Calvin Klein is focused primarily on securing licensing deals. It signed on Premium Golf Brands as the licensee for golf apparel under the Calvin Klein Golf brand, and Marchon Eyewear as the exclusive worldwide-licensee of sunglasses and ophthalmic eyewear under the Calvin Klein Collection and ck Calvin Klein names. Significant partners include Coty's worldwide license for cosmetics and fragrances, such as Obsession and cK One; G-III Apparel Group's license for outerwear and women's apparel in North America; and Jimlar's multiple international footwear deals.
Warnaco, the biggest licensee, owns the designer's rights to underwear and jeans. Warnaco pays Calvin Klein an administration fee based on its global sales of jeanswear, underwear, sleepwear, and intimate apparel, in addition to its sales from more than a dozen ck Calvin Klein banner stores in Europe. A decline in the Warnaco business driven by poor performance in Europe spurred PVH in 2012 to reacquire the ck Calvin Klein license agreement held by Warnaco in an effort to accelerate the brand's global potential.
Beyond the wardrobe, Calvin Klein has boosted its selection of home furnishings. The designer has launched two designer furniture lines under the names Calvin Klein and The curator collection by Calvin Klein Home. The Calvin Klein line is sold exclusively through select Macy's stores, and The curator collection is found at fine furniture retailers in the US. The lines are produced under a licensing agreement with manufacturers Alexandre International and Shayne Industries. Calvin Klein's foray into furniture supports its strategy of extending its home lifestyle products.