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PVH’s Q3 Earnings Surge

Tommy Hilfiger, Calvin Klein and Heritage Brands all see increases in operating profit.

NEW YORK — PVH Corp. late Tuesday delivered better-than-expected third-quarter earnings as Calvin Klein, Heritage Brands and especially Tommy Hilfiger generated increases in profitability.

In the three months ended Oct. 28, the New York-based apparel giant produced net income of $165.4 million, or $2.24 a diluted share, 47.4 percent above the $112.2 million, or $1.54, reported in the third quarter of 2011. On an adjusted basis, eliminating items such as $6.4 million spent on its pending acquisition of Warnaco Group Inc. for $2.9 billion. Earnings per share were $2.34, 4 cents above the consensus estimate of analysts.

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Revenues fell 0.7 percent to $1.64 billion from $1.65 billion, as volume in the Heritage Brands unit dropped 7 percent to $489.5 million, due principally to the exit of the firm from the Timberland wholesale and Izod women’s sportswear businesses. Revenues at Calvin Klein rose 6.1 percent, to $319.6 million, and increased 0.8 percent at Tommy Hilfiger, to $833.6 million. The company said unfavorable currency translation cost Hilfiger about $40 million and that, on a constant currency basis, revenues were up 6 percent.

However, Hilfiger’s operating income climbed 42.2 percent, to $128.8 million, ahead of the 7.3 percent increase at Calvin Klein and the 3.9 percent upswing at Heritage Brands, to $92.4 million and $47.4 million, respectively.

Gross margin improved to 52.9 percent of revenues in the quarter from 50.1 percent in the comparable 2011 period.

Giving the bulk of the credit for the profit improvement to the Tommy Hilfiger and Calvin Klein brands, Emanuel Chirico, chairman and chief executive officer, said, “The Heritage Brands business saw some modest improvement in the quarter, which we believe demonstrates that this business is on the path to return to its historic profitability levels.”

 

The company said that fourth-quarter EPS, expressed on an adjusted basis, is expected to be $1.48 to $1.49, including the expected impact of Hurricane Sandy on business during the first part of November. Full-year guidance was raised to a range of $6.37 to $6.38, above the $6.32 to $6.37 projected on Oct. 2.

Included in the projections are expectations for a 5 percent increase in revenues at Tommy Hilfiger; a 10 percent leap at Calvin Klein and, again hampered by the departure from the Timberland and Izod women’s businesses, a flat performance at Heritage Brands.

Chirico added that the management teams at PVH and Warnaco are “working diligently” to close the Warnaco acquisition in early 2013. Details of the deal were disclosed on Oct. 31.

For the nine months, net income was up 46.3 percent to $346.2 million, or $4.70 a diluted share, as revenues moved ahead 1.1 percent to $4.41 billion.

The company has scheduled a conference call for 9 a.m. this morning to discuss the results.