By  on March 29, 2012

PVH Corp. is tapping the brakes on its fast-growing Tommy Hilfiger and Calvin Klein businesses, projecting both to grow at slower rates than they did in 2011.

In reporting fourth-quarter and full-year results Tuesday, the company said in its guidance that 2012 revenues were projected to be flat to up 2 percent, with the latter figure translating to more than $6 billion from $5.89 billion in 2011. Those projections included an estimate that Tommy Hilfiger would also be flat to up 2 percent and that Calvin Klein would grow 5 to 7 percent, with both numbers held down by unfavorable foreign currency translation. The two designer brands generated respective growth of 15.8 percent, hitting $815.8 million, and 11.9 percent, reaching $278.5 million, in the final quarter of 2011.

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Addressing analysts during a Wednesday morning conference call to discuss results, Emanuel Chirico, chairman and chief executive officer of PVH, endorsed a “conservative” approach to the businesses in light of uncertain market conditions in Europe and the relative certainty of a shift in foreign exchange that would hurt sales and profits. PVH expects gross margin, which declined to 50.5 percent of revenues in the fourth quarter from 52.7 percent in the 2010 period, to grow about 100 basis points this year from the 2011 level of 51.9 percent as cost pressures ease and its mix veers towards a heavier reliance on retail.

“We didn’t have some of the headwinds last year that we have this year,” Chirico said, “the biggest one being foreign currency. But absent that, I think we’ve planned that all into our businesses and I feel about as good this year coming out of the gate for 2012 about our projections and what they may actually turn out to be as I did at this time last year.”

He emphasized that his cautious take on 2012 wasn’t motivated by difficulties in the business, with most operations exceeding plans, and that there was substantial upside potential in its guidance for full-year adjusted earnings of $6.10 to $6.20 a diluted share. For instance, he noted that comparable-store sales in PVH’s North American stores were projected to land in a range of 3 to 4 percent. “And right now, for the first two months of the year, our comps are running up 10 percent, 11 percent. So clearly that bodes well for retail performance in North America,” he said.

“Hopefully, currency, instead of becoming a headwind, might become a tailwind going forward,” Chirico said later. “So I think, clearly, we don’t feel any less optimistic about the growth trajectory both for Calvin and Tommy, and in fact we think that there is opportunity to accelerate that growth in 2013, 2014, 2015 and beyond.”

Business in Heritage Brands is expected to decline between 3 and 4 percent this year, principally due to the exit of businesses such as Timberland and Izod women’s wear, but Ken Duane, vice chairman of PVH, cited a number of initiatives that could help those businesses regain their equilibrium, including an Izod initiative with J.C. Penney beginning Sept. 1. “We’re going to pick up 400,000 square feet in opportunity there,” he said. Weakness at Izod was a major contributor to the 54.8 percent decline in the Heritage Brands unit’s operating income in the fourth quarter.

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