Boosted by a tax benefit of $30.4 million and stronger-than-expected performances at all of its wholesale and retail divisions, Phillips-Van Heusen Corp.’s earnings jumped more than 50 percent in the third quarter. The company, whose brands include Calvin Klein, Izod, Van Heusen and Arrow, also raised its full-year earnings forecast.
This story first appeared in the November 19, 2009 issue of WWD. Subscribe Today.
Net income for the three months ended Nov. 1 was $83.6 million, or $1.58 a diluted share, up 55.6 percent from $53.7 million, or $1.03, in the year-ago quarter. Excluding the tax benefit and nonrecurring expenses, earnings per share was $1.08 in the quarter.
Net revenue in the three months was $697.4 million, down 4.1 percent from $727.5 million a year ago. Revenue was primarily impacted by PVH’s previous exit from its Geoffrey Beene outlet business, which contributed $28.6 million in sales to the 2008 quarter.
Calvin Klein royalty revenue increased 9 percent in the quarter, due principally to strong Calvin Klein brand sales, augmented by a weaker dollar. Licensed sales for the brand were strong in footwear, women’s apparel and outerwear, while relatively flat in jeans and underwear. The global fragrance business was down in the single digits, an improvement from the double-digit declines in the first half of the year.
“The improvement in business trends we experienced in the second quarter intensified during the third quarter and enabled us to significantly exceed our previous revenue and earnings guidance,” said Emanuel Chirico, chairman and chief executive officer of PVH.
Chirico said sales were driven by high levels of marketing spending during the quarter. “This strong performance by all of our brands indicates the beneficial impact of our continued investment in advertising through this most difficult economic environment,” he noted. “We have launched a number of innovative programs that connect our brands with both our retail customers and our end consumers, such as the Izod IndyCar Series campaign with Macy’s and our more recent collaboration with the Pro Football Hall of Fame and J.C. Penney for the Van Heusen brand.”
PVH shifted $5 million in planned advertising from the third quarter into the fourth quarter, which helped boost profits. In total, the company plans to spend $10 million more in advertising in the fourth quarter than it did in the same quarter last year.
PVH increased its EPS estimate for the full year to between $2.95 and $2.99, up from a previous projection of $2.16 to $2.26.
Total revenue for the year is projected to decline 5 percent to a range of $2.37 billion to $2.38 billion. The company expects Calvin Klein royalty revenue will increase 3 percent for the year.
For the nine months ended Nov. 1, net income was $134.9 million, or $2.58 a diluted share, up 4 percent from $129.7 million, or $2.48, a year ago. Total revenue for the three quarters was $1.78 billion, down 6.8 percent from $1.91 billion last year.