By  on October 3, 2012

PVH Corp.’s optimism about the back half of 2012 isn’t relegated to its designer acquisitions.During a series of afternoon Analyst Day presentations in New York Tuesday, the company reported progress in turning around the Heritage Brands business, which weighed on results throughout 2011 and in the first months of 2012 even as its two acquired designer brands, Calvin Klein and Tommy Hilfiger, continued to flourish.“Our Heritage business, which has been a very stable cash-flow driver for us and allowed us to make these acquisitions, had a very tough 2011,” said Emanuel Chirico, chairman and chief executive officer, in his opening remarks. “We’re in a significant turnaround in this year’s second half. We see some really positive results there.”The improvements at the Heritage unit are the result of external forces abating, such as the moderation in cotton prices, and the continuing recovery from problems Chirico described as “self-inflicted.”He said the mounting price pressures being dealt with since late 2010 are “now totally behind us. We started to see some really positive results in the second quarter and I’ve been very clear that through the early portions of this third quarter...this business has really started to kick in.“We see this business going back to historical levels of profitability of 10, 12 percent [operating margin] over the next two years,” Chirico said.The operating margin at Heritage slumped to about 7.2 percent of sales during 2011.With Klein and Hilfiger continuing to demonstrate strength in the U.S. and abroad, the ongoing recovery at Heritage provided additional cause for optimism at PVH, which raised its profit expectations for the third quarter and full year just prior to the meeting.Guidance for adjusted earnings for the third quarter, which ends at the conclusion of October, was increased to a range of $2.28 to $2.30 a diluted share, versus prior guidance of between $2.20 and $2.25 and year-ago earnings per share of $1.89. Adjusted earnings are a non-GAAP measure that excludes extraordinary items such as integration and restructuring costs.For the full year, EPS on an adjusted basis is expected to land at $6.32 to $6.37, up from the guidance of $6.25 to $6.32 provided when the firm reported second-quarter results on Aug. 27. Year-ago EPS was $5.38.Discussing the ongoing recovery at Heritage Brands, Ken Duane, ceo of wholesale apparel, noted that brands in the PVH Heritage stable hold a 50 percent share of the U.S. neckwear market and, through brands including Van Heusen and Arrow, a 45.5 percent share of the U.S. dress shirt market. Falling cotton prices helped lift margins, as did the exit from the Izod women’s and Timberland business, which generated “close to $130 million” of volume but only $2 million in profit.“We have now exited those businesses,” Duane said.Shares of PVH fell 3 cents, less than 0.1 percent, to $92.92 Tuesday but rose more than $1 in the early moments of after-hours trading.

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