Tommy Hilfiger and Calvin Klein drove PVH Corp. to strong first-quarter gains — and Emanuel Chirico said the dealmaking market is improving as he looks for a third brand to shift the company into a higher gear.
Chirico, chairman and chief executive officer of PVH, told WWD that the mergers and acquisitions market has “settled” from a valuation standpoint and that the industry would see more deals this year than it did in 2017.
“I don’t think things are cheap by any means if you look just at valuations on a historical basis,” Chirico said.
But Chirico, who rolled both Tommy Hilfiger and Warnaco into PVH as ceo and earlier helped reel in Calvin Klein added: “Right now, given how the industry ended last year fairly strong, coming into this year strong, I think it sets up well for the kinds of acquisitions you might see as you go forward. We’d love to make another transaction. We look at the world around us and feel like we’re outperforming, we’re gaining market share. If we could find a third leg to the stool, another brand that could fit into our profile and give us global growth, that’s something we’d like to do. We’re working on it.”
PVH could do a deal with real scale given that it has a $12 billion market capitalization and an existing business with solid momentum.
“The underlying business has never been stronger,” Chirico said.
PVH’s first-quarter net income more than doubled to $179.4 million, or $2.29 a diluted share, from $70.4 million, or 89 cents, a year earlier. Adjusted earnings per share totaled $2.36, up from $1.65 a year earlier and 11 cents ahead of the $2.25 Wall Street analysts projected.
Revenues for the three months ended May 6 rose 16.4 percent to $2.31 billion from $1.99 billion. The top line gained 10 percent on a constant currency basis.
Calvin Klein’s revenues rose 18 percent to $890 million while Tommy Hilfiger’s revenues increased 21 percent to $1 billion. Both brands saw growth at home and abroad, with their own distribution and through wholesale partners. Revenues for the company’s Heritage Brands business increased 5 percent to $409 million.
As Chirico looks to grow PVH, don’t bet on many e-commerce only deals. PVH bought intimates e-tailer True & Co. last year and while that deal has helped inform how Tommy Hilfiger and Calvin Klein go to market and provided valuable insights, Chirico said most online businesses don’t really make the brand cut.
“We’ve looked at a number of these e-commerce only, direct-to-consumer online platforms that are just that and we question whether most of them are true brands,” the ceo said. “They may have an innovative approach to approaching the consumer, but can you take the brand and really grow it online, off-line. Most of the brands we’ve seen don’t really stand up to the test.”
Right now, PVH’s key brands seem to be standing up to the test pretty well.
The company opened up a little more upside in its outlook for the year, despite some macroeconomic volatility that led to a smaller benefit from foreign currency translations than anticipated. The company is now looking for adjusted earnings per share of $9.05 to $9.15 a share, up from the $9 to $9.10 previously projected.
The earlier projection had foreign currency exchange boosted results by 35 cents, while the now expects just a 12 cent gain from currency.
Revenues are expected to increase 6 percent this year, with an 8 percent rise at Calvin Klein, a 7 percent increase at Tommy Hilfiger and a flat performance in the Heritage business.