PVH Corp. rode strong results at the Tommy Hilfiger brand to a second-quarter earnings “beat,” sending shares up more than 5 percent in after-hours trading.
The strength at Hilfiger included an 8.9 percent increase in revenues, to $870.4 million, driven by robust growth at wholesale, expansion of its retail footprint and increases in comparable-store sales in North America and abroad, resulting in an 18 percent increase in adjusted operating income. It helped offset declines in profits at the Calvin Klein unit, which continues to work through the integration of the jeans business previously operated by Warnaco, and at the Heritage Brands division, where comps declined 4 percent.
In the three months ended Aug. 3, the New York-based apparel giant’s net income was $126.5 million, or $1.52 a diluted share, versus a net loss, caused in great part by the integration of Warnaco operations, of $5.3 million, or 7 cents a diluted share. Adjusted earnings per share was $1.51, 9 cents above the Wall Street consensus view.
Revenues rose 0.5 percent to $1.98 billion from $1.96 billion in the prior-year quarter and just below the $1.99 billion expected, on average, by analysts. Gross margin translated to 53.4 percent of revenues, up from 52.2 percent in the 2013 quarter.
Investors greeted the results, issued after the close of the equity markets, with enthusiasm, sending shares up $6.07, or 5.2 percent, to $123.20 in the first hour of after-hours trading Wednesday.
Emanuel Chirico, chairman and chief executive officer of the company, said, “Despite the anticipated difficult macroeconomic environment, we successfully navigated through heightened promotional activity in North America and volatility in certain key international markets.”
PVH expects growth in adjusted EPS in excess of 15 percent in the second half of the year “as we anniversary our strategic investments in our acquired businesses, introduce our new fall Calvin Klein jeanswear product and presentations at retail and experience improving trends in our southern European business,” according to the ceo.
At Calvin Klein, revenues were up 0.6 percent to $674.6 million and operating income, on a non-GAAP basis, down 10.1 percent to $85.7 million. While North American comps rose 2 percent, the wholesale jeans business declined “as the company works to restructure the sales distribution mix by reducing off-price sales.”
At Heritage Brands, operating profit, again on a non-GAAP basis, was down slightly by more than a third to $29.5 million, and revenues declined 13 percent to $430.6 million, although they were essentially flat excluding the $62 million contributed in the 2013 quarter by G.H. Bass, sold to G-III Apparel Group Ltd. last year. The promotional climate in the moderate tier of retail was cited for compression in margins and profits.
However, Hilfiger’s results more than compensated for any weakness at the company’s two other business units. The 8.9 percent gain in revenues was essentially evenly divided between top-line growth of 8 percent in North America and 9 percent in international markets. U.S. comps were up 2 percent and international comps up 3 percent.
PVH reaffirmed its full-year guidance for adjusted EPS of $7.30 to $7.40, bracketing the current consensus estimate of $7.38, and revenues of $8.4 billion, slightly below the $8.47 billion expected by analysts.
Year-to-date net income was $161.8 million, or $1.94 a diluted share, versus a loss of $15.7 million, or 19 cents, in the first half 2013. Revenues rose 1.7 percent to $3.94 billion.
PVH will hold a conference call to discuss the results and outlook today.
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