Emanuel Chirico, chairman and chief executive officer of PVH, said, “Having now owned the business for about 45 days, we believe that additional investments above our initial expectations are required to achieve our goal of rebuilding the global Calvin Klein jeanswear and underwear businesses.”
He added that PVH views 2013 “as a year of investment and transition for the Warnaco business,” with specific efforts focused on infrastructure, jeanswear design and quality, and in-store marketing.
Chirico cited the need for a rationalization of global inventory levels, as well as “appropriate talent to fill key design, marketing and merchandising positions.”
PVH confirmed that Mark Whyman and Karyn Hillman, appointed at Warnaco a year ago as chief commercial officer of the Calvin Klein businesses and chief merchandising officer for Calvin Klein Jeans and Jeans Accessories, respectively, will be joining PVH’s Calvin Klein business unit. Their exact roles within the Calvin Klein structure haven’t yet been disclosed. Helen McCluskey, previously president and ceo of Warnaco, has become a director of PVH.
The Warnaco transaction is now projected to dilute 2013 earnings by about 25 cents. PVH’s preliminary guidance for the full year is for adjusted earnings per share of $7, below the $7.46 earlier projected by Wall Street.
The cautious words about Warnaco pressured PVH stock, which was down 4.6 percent, to $107.61, in early after-hours trading. Shares had shed 1 percent, to $112.79, during Wednesday’s regular session.
In its guidance, PVH said sales this year are expected to hit $8.2 billion, 35.7 percent above the 2012 level, with Warnaco’s results included for all but about two weeks of the fiscal year. The company also noted that it would relinquish about $200 million in transactions between the two companies as well as about $100 million because of the absence of a 53rd week registered in 2012.
In the fourth quarter ended Feb. 3, PVH’s net income more than doubled to $80.7 million, or $1.09 a diluted share, from $35.5 million, or 48 cents, in the prior-year period. On an adjusted basis, stripping out the effect of an accounting change, EPS was $1.60, 10 cents better than analysts, on average, had expected.
Total revenues for the quarter were up 6.7 percent to $1.64 billion from $1.53 billion in the 2012 period, just above consensus estimates for $1.6 billion in revenue. Gross margin expanded to 53.8 percent of sales from 50.5 percent a year ago.
All three PVH business units registered increases in operating income, led by Tommy Hilfiger’s 72.8 percent growth to $96.1 million as revenues were up 9.2 percent to $891.1 million. Calvin Klein logged the largest revenue increase, up 14 percent to $317.4 million, and saw a 5.2 percent increase in operating income, to $73.8 million. The heritage brands business enjoyed a turnaround with operating income soaring 178 percent to $26.6 million despite a 2.5 percent sales decline to $427.7 million.
For the full year, net income rose 57.4 percent to $433.8 million, or $5.87 a diluted share, while revenues added 2.4 percent to $5.54 billion.
The company will hold a conference call this morning to discuss the results.
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