PVH Corp.’s two marquee acquisitions, Tommy Hilfiger and Calvin Klein, allowed it to overcome softness in the Heritage Brands segment and cruise past its own elevated expectations for third-quarter profits and sales.
The Hilfiger and Klein businesses posted robust double-digit increases in operating income and revenues for the quarter. On a conference call late Thursday afternoon, Emanuel Chirico, chairman and chief executive officer, said that both brands began the fourth quarter with healthy increases in November and appeared on track to again outperform their plans.
But Chirico described business for the Heritage Brands segment, particularly in sportswear, in U.S. department stores as tough and showing no signs of easing. He said he expects the Heritage segment to be “flattish” next year, conforming to the third-quarter trend of increases in dress furnishings and declines in sportswear. Heritage Brands include Van Heusen, Arrow, Izod and a number of licensed brands.
In the third quarter, a 7.2 percent decline in the wholesale sportswear portion of the Heritage business, to $190.3 million, was only partially offset by a 3.8 percent increase in dress furnishings, to $165.4 million, with overall revenues for the unit, including retail, down 1.7 percent to $526.3 million. Operating income in the Heritage Brands component fell 33.9 percent to $44.8 million, while Calvin Klein’s profits rose 13.3 percent, to $85.7 million, and Tommy Hilfiger’s were up 45.8 percent on a GAAP basis, to $90.5 million.
For the three months ended Oct. 30, the New York-based apparel giant’s net income accelerated 12.4 percent to $112.2 million, or $1.54 a diluted share, from $99.8 million, or $1.39 a year ago. Eliminating a variety of gains and charges, many resulting from the company’s 2010 acquisition of Hilfiger, non-GAAP earnings per share were $1.89, 8 cents above the peak of the range of $1.75 to $1.81 provided as guidance by PVH in August and subsequently adopted by analysts as their consensus estimate.
Revenues advanced 9.3 percent to $1.65 billion from $1.52 billion in the year-ago quarter. Coincidentally, Hilfiger revenues in the quarter, $826.6 million, were less than $1 million under the $827.5 million sum of the combination of revenues at Calvin Klein ($301.2 million) and Heritage Brands ($526.3 million). Hilfiger revenues were up 16.7 percent in the quarter and those in the Klein unit, which derives substantially more of its revenue from royalties, were up 10.5 percent.
In August, the company projected revenues of $1.61 billion to $1.63 billion.
Gross margin fell to 50.1 percent of revenues from 52.3 percent, while growth in selling, general and administrative expenses remained well below the pace of revenue expansion, up 2.9 percent to $633 million.
Chirico noted that PVH hadn’t seen “any significant customer resistance to our increased fall retail selling prices” for Calvin Klein and Tommy Hilfiger dress shirts in the U.S., successfully passing along hikes of 8 percent to 9 percent.
Asked to comment about the Thanksgiving weekend, he pointed out, “Clearly on the main floor in department stores across the United States, there was a promotional bent and those businesses, between the couponing and the promotions, clearly volume was done but it was done at a price. But on the collections floor, although we were promotional and we were there to do business on a comparative basis year-over-year, our [average unit retails] were up in the high single digits.”
With the third-quarter results exceeding expectations, full-year EPS guidance, exclusive of special items, was set at $5.23 to $5.25 on revenues of $5.83 billion to $5.85 billion, including a contribution of $2.99 billion to $3 billion from Hilfiger.
EXCLUSIVE: Two and half months after John Targon, cofounder and codesigner of Baja East, was hired as creative director of the contemporary division at Marc Jacobs, he has left the company, WWD has learned. Marc Jacobs International, which is owned by LVMH Moët Hennessy Louis Vuitton, confirmed Targon’s departure in a statement: “John Targon is a talented designer and we appreciate the work he has done here. Ultimately working together did not make sense for the brand and we wish him the best.” Read the story by @jessiredale, link in bio. #wwdnews
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With her costume pearl necklace and what-you-see-is-what-you-get style, Barbara Bush, who died Tuesday at age 92, was a straight-shooter from start to finish.
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Western and ’90s trends have influenced denim for fall 2018. Think raw, dark and coated jeans mixed with bold prints and tough leather. #trendtuesdays #wwdfashion (Styled by @thealexbadia;📷: @ryanplett)