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Ongoing struggles with the Calvin Klein Jeans business didn’t stop PVH Corp. from beating Wall Street’s and its own expectations for third-quarter earnings.
This story first appeared in the December 10, 2013 issue of WWD. Subscribe Today.
But the strength during the quarter didn’t translate into optimism about the holiday season. The New York-based apparel giant stuck with its full-year earnings guidance of $7 a share, implying fourth-quarter adjusted profits of $1.40 a diluted share, below analysts’ consensus estimate of $1.53.
“Despite better-than-expected third-quarter results, we believe the current holiday season will be very competitive and highly promotional,” said Emanuel Chirico, chairman and chief executive officer.
Net income for the three months ended Nov. 3 rose 17.3 percent to $196.6 million, or $2.37 a diluted share, from $167.7 million, or $2.27. Excluding a series of one-time items such as integration costs related to the February acquisition of Warnaco Group Inc. and a pretax loss of $19 million on the sale of the assets of Bass to G-III Apparel Group Ltd., adjusted earnings per share were $2.30, above Wall Street’s expectations for $2.24 and PVH’s guidance of $2.25.
Revenues totaled $2.26 billion, 37.5 percent higher than the $1.64 billion recorded a year earlier.
Wall Street took the conservative guidance in stride, sending shares up 50 cents, or 0.4 percent, to $127.93 in after-hours trading. Prior to the afternoon earnings release, the stock fell 2.1 percent to $127.43 in regular trading Monday.
Chirico noted that the Calvin Klein businesses in Asia and Brazil performed well in the quarter, as did the global underwear business that came to PVH as part of Warnaco.
“However, our Calvin Klein jeans business, particularly in North America and Europe, continues to underperform and be an area of management focus,” the ceo said.
Overall, the Warnaco businesses added $503 million to the company’s top line, adjusting for the loss of royalties PVH received from Warnaco before the takeover.
The Tommy Hilfiger and Heritage Brands units both saw revenues increase 10 percent, to $920.7 million and $538.8 million, respectively.
However, the company noted that, without the addition of the Speedo, Warner’s and Olga businesses previously attached to Warnaco, Heritage unit revenues would have decreased 6 percent. The decline of the pre-acquisition Heritage businesses was due to the closure of underperforming stores within the division and, hurt by weakness at Bass, a 3 percent decline in same-store sales. The sale of Bass to G-III was completed on Nov. 4, the first day of PVH’s fourth quarter.
The company will hold a conference call this morning to discuss the results.