NEW YORK, United States — PVH-owned Calvin Klein is exiting its luxury collection business, closing its office in Milan and laying off staff in New York, according to a source with direct knowledge of the strategy. Michelle Kessler-Sanders, the president of the 205W39NYC ready-to-wear business, will leave the company in June. Overall, about 100 people, or 1 percent of PVH's global workforce, will be affected.

These announcements are not unexpected. After Calvin Klein parted ways with chief creative officer Raf Simons at the end of 2018, the brand said it was rethinking its approach to the luxury market, embarking on a strategy that would "[offer] an unexpected mix of influences and moving at an accelerated pace."

While the initial plan was to replace 205W39NYC with another collection, the company has decided to not to do so, hence the layoffs in New York and Milan. In January, Shiffman announced that the brand would close its 654 Madison Avenue flagship store, which Simons renovated in 2017, in addition to other changes, some of which came to fruition this week.

Despite the seeming finality of the decision to exit ready-to-wear, Calvin Klein’s strategy is still in flux.

Most of the brand’s sales come from underwear and denim, much of which is produced by third-party licensing partners. But chief executive Steve Shiffman still plans to develop what the source called "aspirational" product. The search for a new design director to lead that effort continues, but it's presumed that the designer won’t be as high profile as Simons, said the source.

Rumours have been circulating that Kevin Carrigan, who was the global creative director at Calvin Klein for 18 years until Simons was appointed, might be returning given that he left his most recent post at Ralph Lauren at the beginning of the year. However, a source with knowledge of the business said he is not slated to come back to Calvin Klein.

What exactly this new designer will be working on is yet to be determined. The brand might decide to follow the model that has been so successful at PVH sister brand Tommy Hilfiger, where sales increased 11 percent to $1.1 billion in the third quarter of 2018.

Hilfiger creates a halo effect not through luxury product, but through influencer-driven design collaborations that are launched with high-production runway shows during fashion month.

Regardless of what happens, it will likely be far removed from PVH's best-laid plans. Calvin Klein had high hopes for Simons' tenure, which began in August 2016 and lasted just over two years. In an attempt to emulate Gucci, where sales exploded after disruptive designer Alessandro Michele was installed as creative director, PVH gave Simons complete creative control over everything from fragrance and underwear to marketing.

Calvin Klein rapidly expanded the distribution for Simons' ready-to-wear 'Collection' line, which he renamed 205W39NYC, thinking it could become a money maker. However, sales did not materialise, and the brand hired former L'Oreal exec Marie Gulin-Merle as chief marketing officer in early 2018 to course correct. (Unlike past marketing heads, she did not report to Simons.) In October 2018, chief executive Emanuel Chirico publicly expressed disappointment over the brand's direction under Simons' watch. At the end of December, just before the holidays, Simons' exit was officially announced.

Calvin Klein also said in January that it would form a new consumer marketing division led by Gulin-Merle focused on consumer engagement and shopper experience.

A representative for the Calvin Klein did not comment on the record; PVH is in a quiet period ahead of the release of its 2018 annual report.

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