Strength at Tommy Hilfiger and Calvin Klein helped offset weakness at PVH Corp.’s heritage brands unit and send the company’s first-quarter revenues and profits well above its own guidance and Wall Street’s estimates.
In the three months ended April 29, the New York-based apparel giant saw net income expand 61.5 percent to $93.1 million, or $1.27 a diluted share, from $57.7 million, or 79 cents, in the year-ago quarter. Excluding special items, adjusted earnings per share was $1.30 against the analyst consensus estimate of $1.26 and PVH’s most recent guidance update, issued last month, that it would be “at least at the high end” of earlier projections for non-GAAP EPS of $1.23 to $1.25.
Revenues increased 4.3 percent to $1.43 billion from $1.37 billion in the 2011 period as consolidated gross margin receded to 53 percent of revenues from 53.2 percent a year ago.
Emanuel Chirico, chairman and chief executive officer, noted that the Hilfiger and Klein brands “continued to demonstrate their worldwide consumer appeal during the first quarter, allowing us to perform above our expectations for both revenue and EPS despite the cost pressures and economic headwinds in Europe that have impacted our industry.”
Despite the economic uncertainties currently at work, PVH increased its full-year guidance for non-GAAP EPS to a range of $6.15 to $6.25 from its earlier guidance of $6.10 to $6.20. It continues to expect an increase in revenues of 1 to 2 percent, putting projected volume for the year at $5.95 billion to $6.01 billion.
Chirico noted that cost pressures are expected to abate in the second half of the year.
In the quarter, Tommy Hilfiger and Calvin Klein accounted for 72.3 percent of overall revenues, or $1.03 billion, versus 70.2 percent, or $961.1 million, in the first quarter of 2011. Revenues at Hilfiger grew 7.7 percent to $770.4 million despite a $20 million negative impact from currency translation. Same-store sales were up 16 percent in North America and 5 percent in Europe. Operating income was up 53.4 percent, to $102.4 million, although ahead a more modest 13.3 percent on a non-GAAP basis, eliminating the impact of integration and restructuring charges, principally on the 2011 period.
Calvin Klein revenues rose 6.7 percent to $262.1 million from $245.6 million, while operating income was up 4.9 percent to $58.3 million. Same-store sales rose 9 percent. The company noted a 1 percent increase in royalty revenue despite “challenging business for the jeanswear and underwear product categories in Europe and a planned reduction in U.S. jeanswear sold to secondary channels.” The Warnaco Group Inc. holds the rights to jeanswear and underwear under the Calvin Klein brand. Calvin Klein Inc. took its European CK Calvin Klein business in Europe in-house in March, terminating that component of the PVH-Warnaco alliance.
The heritage brands unit — which houses owned and licensed labels including Van Heusen, Izod, Bass and Arrow — saw operating profits contract 55 percent to $17.7 million as overall revenues were off 3.2 percent to $394.9 million. PVH said that a same-store sales gain of 3 percent “was more than offset by a planned combined 6 percent decrease in the wholesale business.” Wholesale dress furnishings sales were down 10.6 percent to $122.1 million in the quarter while sportswear declined 0.8 percent to $137.2 million and retail rose 1.8 percent to $135.7 million. In the final quarter of 2011, problems at Izod sent sportswear sales down 17 percent.
The company plans to hold a conference call this morning to discuss the results and is on the schedule to address the Citi 2012 Global Consumer Conference today.
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