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PVH Corp.’s retail businesses have experienced “erratic” results in its retail operations during the fourth quarter, but have so far been on plan.
That was the report card delivered by Emanuel Chirico, chairman and chief executive officer of PVH, on the morning after the company reported third-quarter profits that exceeded expectations coupled with fourth-quarter guidance that was below Wall Street’s earlier expectations.
“In the fourth quarter, our sales to date are on plan globally,” Chirico said during a Tuesday morning conference call. “In North America, we continue to see low-single-digit [comparable-store] increases at Tommy [Hilfiger] and Calvin [Klein], while our Heritage business continues to post midsingle-digit negative comps.”
While the Heritage unit’s results in the third quarter were on plan, its retail business was “disappointing,” the ceo said, with comps down 3 percent and weakness especially marked in the Bass division, which was sold to G-III Apparel Group Ltd. on Nov. 4, the first day of the fourth quarter.
Chirico noted that the promotional climate is expected to carry through the quarter, prompting the New York-based apparel giant’s conservative guidance for the period. He cited the “choppiness” at retail for the company’s guidance for fourth-quarter earnings of $1.40 a share, below the $1.53 expected, on average, by Wall Street analysts.
“I think everyone has had to be more promotional than originally planned,” he said. “It doesn’t make it a disaster at all; it’s just putting more pressure on us.”
With fewer shopping days between Thanksgiving and Christmas, he said PVH expects holiday business “to really build, and to build late. And traffic’s been up and down across the board.”
That didn’t stop PVH’s shares from rising 3.5 percent to $131.87 or Brean Capital analyst Eric Beder from reiterating his “buy” rating on the stock and $150 price target based on what he described as the company’s “familiar pattern of registering upside in the current quarter…and providing conservative guidance in the upcoming quarter.”
In the third quarter, net income rose 17.3 percent to $196.6 million, or $2.37 a diluted share. Eliminating special items, earnings per share hit $2.30, higher than Wall Street’s expectations for $2.24 and PVH’s most recent guidance for $2.25. Revenues rose 37.5 percent to $2.26 billion from $1.64 billion, with $503 million of the most recent quarter’s sales attributable to the addition of Warnaco’s operations.
Asked to pinpoint the season’s most promotional areas, Chirico immediately cited jeans, “both in North America [and] I would even say that in Asia and Europe as well.” PVH continues to struggle to improve the Calvin Klein Jeans business acquired as part of its Warnaco purchase, battling distribution and merchandising problems inherited with the acquisition along with bloated inventories in China and elsewhere.
Yet Calvin Klein Jeans has been a highlight of a growth rate of about 10 percent for the brand’s business in Brazil, he added.