NEW YORK — The costs of integrating Calvin Klein Inc. into the corporate fold contributed to a first-quarter loss for Phillips-Van Heusen Corp.
This story first appeared in the May 22, 2003 issue of WWD. Subscribe Today.
Next year, though, PVH is looking for its latest addition to help drive double-digit earnings increases.
Losses available to common shareholders tallied $6.6 million, or 22 cents a share, during the quarter ended May 4. This compared with the year-ago deficit of $831,000, or 3 cents.
Revenues for the three months picked up 7.9 percent to $377 million from $349.4 million a year ago.
Exclusive of integration costs from the Feb. 12 acquisition of the Klein business, the firm’s bottom line ascended into the black, with earnings available to common shareholders of $3.3 million, or 11 cents a share, thanks primarily to profits from the Klein licensing and design unit.
Also, operating earnings in the firm’s apparel and footwear segment rose 43 percent, driven by higher margins in the wholesale apparel businesses, especially Izod, Van Heusen and Arrow. The Bass footwear business had weak sales of seasonal merchandise and lower operating profits.
Before the after-market report, investors traded shares of PVH down 1.6 percent, to close at $12.99 on the New York Stock Exchange Wednesday.
Integration costs related to the deal include operating losses of Klein’s men’s and women’s collection apparel businesses and the costs of certain logistical and back-office overlaps. PVH will transfer the collection businesses to Vestimenta SpA, under a license agreement, which will be in full effect for the spring 2004 collection.
“The integration of the Calvin Klein acquisition continues to proceed on plan and we continue to reaffirm our belief in the strength and opportunities this brand represents,” chairman and chief executive Bruce Klatsky said in a statement. “We are moving forward on expanding the global marketing of the Calvin Klein brand, and remain on target to launch a better men’s and women’s sportswear business in the fall of 2004.”
During the quarter, PVH issued $150 million of 8.5 percent senior unsecured notes, the proceeds of which were used to repay the $125 million 10 percent secured notes borrowed in connection with the acquisition and for general corporate purposes.
This year marks a transitional period for the firm, when the Klein acquisition will be dilutive to earnings.
“We continue to remain optimistic that, beginning with 2004 and beyond, we can achieve earnings per share growth of 15 to 20 percent against our projected 2003 operating earnings of 95 cents to $1, which excludes the Calvin Klein integration costs,” Klatsky added.