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Phillips-Van Heusen Corp. on Wednesday posted a drop in second-quarter profits due in part to declines in the wholesale and retail heritage brand businesses that were offset by strong growth in its Calvin Klein licensing operation.
For the three months ended Aug. 3, income declined by 25.3 percent to $29.2 million, or 56 cents a diluted share, from $39.1 million, or 68 cents, in the same year-ago period. Earnings were also negatively impacted by $5 million in start-up costs associated with the firm’s Timberland wholesale men’s sportswear business and Calvin Klein specialty retail stores.
The company noted the “recent bankruptcy filings of certain of our wholesale customers resulted in a sales shortfall of approximately $6 million in the quarter and negatively impacted pretax earnings by approximately $3 million, or 3 cents a share, which includes the related reserves for uncollectible receivables.”
Total revenues in the quarter rose 1.6 percent to $561 million from $552.4 million. Revenues include a 1.8 percent decline in sales to $480.3 million and a 24.4 percent jump in royalty income to $56 million.
For the six months, income fell by 17.5 percent to $76 million, or $1.45 a diluted share, from $92.1 million, or $1.60, a year ago. Total revenues gained 3.7 percent to $1.19 billion.
The company said the Calvin Klein licensing business continued its strong performance during the second quarter and posted revenue and earnings growth of 30 percent and 47 percent, respectively. “This performance was driven by continued growth across virtually all product categories and regions of the globe, with jeans and underwear performing exceptionally well,” the company said.
In addition, the company said the Calvin Klein outlet retail business continued to exhibit strong sales performance. Total outlet comparable-store sales in the quarter fell by 2 percent, with the Calvin Klein outlet business achieving comps growth of 9 percent compared with the heritage brand outlet businesses, which posted a comps decline of 5 percent.
“We are very pleased with our second-quarter results, particularly given the current economic environment. Calvin Klein remains a key driver of our growth and profitability as it continues to outperform our expectations, both internationally and domestically. The broad global presence and continued international growth of Calvin Klein has helped to offset the impact of the economic downturn in the U.S. on our heritage brand businesses,” said Emanuel Chirico, PVH chairman and chief executive officer.
He added the company has been aggressive in taking action to keep inventory levels clean heading into the second half and that the company is on track to convert 25 of the Geoffrey Beene outlet stores into Calvin Klein sites.
The company projected full-year 2008 revenue at $2.56 billion to $2.58 billion, an increase of 6 percent over 2007. It maintained its previous projection for full-year earnings per share to be in the range of $3.32 to $3.41.