NEW YORK -- Tommy Hilfiger Corp.'s strong holiday showing in women's wear helped it beat third-quarter earnings expectations by 3 cents a share, despite a decline in income, but cautious guidance for fiscal 2003 cost the company's shares...
NEW YORK -- Tommy Hilfiger Corp.'s strong holiday showing in women's wear helped it beat third-quarter earnings expectations by 3 cents a share, despite a decline in income, but cautious guidance for fiscal 2003 cost the company's shares one-sixth of their value on the New York Stock Exchange Wednesday.
For the three months ended Dec. 31, the fashion firm posted an income drop of 13.5 percent to $37 million, or 41 cents a diluted share, from $42.7 million, or 47 cents, in the comparable quarter last year. The Thomson Financial/First Call consensus estimate was 38 cents. Revenue dipped 0.2 percent to $474.8 million from $475.8 million.
Shares of Tommy on Wednesday shed $2.48, or 16.4 percent, to close at $12.65.
Joel Horowitz, chief executive officer, said in a conference call to Wall Street analysts Wednesday that the firm was "comfortable with fourth-quarter estimates of 40 cents, which is the current First Call consensus of 38 cents adjusted upward to reflect the [company's lower] tax rate."
The ceo said revenue for the fourth quarter is expected to increase in the midsingle digits from the same period last year. Fiscal 2003 revenue guidance was projected to be flat relative to fiscal 2002, with EPS at between $1.55 and $1.75.
One analyst on the call expressed concern that Tommy wasn't growing at a fast enough rate, but Horowitz pointed out, "We are just nearing Feb. 1, with a long way ahead of us. It is not prudent to paint a rosy picture." However, in reaction to market and general economic conditions, the firm is delaying new store openings and will concentrate on improving the performance of its specialty stores.
Overall, the ceo said that the company was "disappointed" in its specialty store business and will change the stores' mix to differentiate them further from those of department store accounts. "The product will be slightly more mature, a little better fabric, and price points 10 percent higher than department store price points. Also, by having product differentiation, it gives us more freedom to run our own markdown cadence and not be competing with our [retail] customers, which we don't want to do," the ceo said.Although women's has performed well, Horowitz said the mix needs to be adjusted from its current dependence on denim, which constitutes 60 percent of the assortment. Current plans for fall call for a 50-50 denim/sportswear split.
Noting a war chest of $415 million, the ceo was asked by an analyst about potential acquisitions. Horowitz said that the company recently paid the balance of a term loan in the amount of $60 million. Even with the balance of the cash and the continual buildup of cash, the company was keeping in mind an upcoming $250 million bond due in June 2003.
While the company considers different potential acquisitions, the ceo said debt obligations and uncertainties for 2002 will keep the company more focused on maintaining a "comfortable position" rather than buying something just for the sake of making a purchase.
The men's business remained the challenge for the company. Tommy's retail business showed a 16.5 percent revenue increase, driven principally by sales in newly opened stores. Licensing revenues were down 23 percent as expected, due to the acquisition of the Tommy Europe business.
For the nine months, income was down 3.5 percent to $93.8 million, or $1.04 a diluted share, from $97.4 million, or $1.06, in the year-ago period. Revenues slipped 3 percent to $1.38 billion from $1.41 billion.
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