PVH posts rise in Q3 earnings, raises full year EPS outlook

Earnings per share on a GAAP basis, PVH said, was 3.05 dollars for the third quarter of 2017 compared to 1.56 dollars in the prior year period. On a non-GAAP basis, EPS was 3.02 dollars compared to 2.60 dollars in the prior year period. Revenue for the quarter increased 5 percent or 3 percent on a constant currency to 2.4 billion dollars over the prior year period. Earnings before interest and taxes on a GAAP basis for the quarter increased to 281 million dollars and on a non-GAAP basis EBIT was 295 million dollars compared to 276 million dollars in the prior year period.

Commenting on these results, Emanuel Chirico, the company’s Chairman and CEO, noted in a statement: “We are very pleased with the strong performance in the third quarter, which exceeded our expectations despite the multiple natural disasters that negatively impacted our North America businesses. We have raised our full year earnings outlook based on our third quarter outperformance, the improvement in foreign currency and our belief that the strength of our brands will continue to drive revenue and profitability increases throughout the fourth quarter.”

Third quarter highlights of PVH business segments

Revenue in the Calvin Klein business for the quarter increased 6 percent or 4 percent on a constant currency basis to 943 million dollars, which PVH said, includes an approximately 20 million dollars reduction resulting from the November 2016 deconsolidation of the company’s Calvin Klein business in Mexico.

Calvin Klein International revenue increased 20 percent or 16 percent constant currency to 467 million dollars, driven by continued positive performance in the European wholesale business and strong international retail results. The growth in retail was attributable to a 9 percent increase in international comparable store sales and square footage expansion in company-operated stores.

Calvin Klein North America revenue decreased 5 percent or 6 percent on constant currency basis to 476 million dollars as a result of the Mexico deconsolidation and a 1 percent decline in North America comparable store sales.

Revenue in the Tommy Hilfiger business increased 10 percent or 7 percent to 1 billion dollars, while Tommy Hilfiger International revenue increased 16 percent or 11 percent to 609 million dollars, driven by outstanding performance across Europe and continued strength in Asia. Tommy Hilfiger International comparable store sales increased 7 percent. Tommy Hilfiger North America revenue increased 2 percent or 1 percent on constant currency basis to 410 million dollars. The company said, this increase was attributable to a 6 percent increase in comparable store sales, partially offset by a reduction of approximately 20 million dollars from the discontinuation of the company’s directly operated womenswear wholesale business in the US and Canada during the fourth quarter of 2016 in connection with the licensing of this business to G-III Apparel Group.

Revenue in the Heritage Brands business for the quarter decreased 7 percent to 396 million dollars partially due to a planned shift in the timing of wholesale shipments from the third quarter into the second quarter as compared to the prior year periods. Comparable store sales increased 2 percent.

Nine months revenue up 5 percent at PVH

Revenue for the first nine months of 2017 increased 5 percent to 6.4 billion dollars compared to the prior year period. PVH added that the revenue increase was due to a 6 percent increase in the Calvin Klein business compared to the prior year period, driven by continued strength in Europe and China, partially offset by a reduction of approximately 50 million dollars from the Mexico deconsolidation. International comparable store sales increased 6 percent, while North America comparable store sales decreased 3 percent.

There was a 7 percent increase in the Tommy Hilfiger business compared to the prior year period, driven principally by strong performance in Europe and the inclusion of a full first quarter of revenue from the China business as a result of the TH China acquisition in April 2016. Tommy Hilfiger International comparable store sales increased 8 percent. Partially offsetting these increases was a decrease in North America revenue attributable to a reduction of approximately 60 million dollars resulting from the G-III license. North America comparable store sales increased 1 percent.

Revenue in the Heritage Brands business was relatively flat compared to the prior year period and comparable store sales in the business increased 1 percent. Earnings before interest and taxes on a GAAP basis for the first nine months decreased to 574 million dollars from 635 million dollars in the prior year period. Earnings before interest and taxes on a non-GAAP basis was 687 million dollars, inclusive of a 20 million dollars negative impact due to foreign currency exchange rates, compared to 647 million dollars in the prior year period.

2017 Guidance:

PVH currently projects that 2017 earnings per share on a GAAP basis will be in a range of 6.80 dollars to 6.82 dollars compared to 6.79 dollars in 2016 and earnings per share on a non-GAAP basis will be in a range of 7.78 dollars to 7.80 dollars compared to 6.80 dollars in 2016. Both projections include the expected negative impact of 0.17 dollars per share related to foreign currency exchange rates. These projections also reflect an additional 20 million dollars of Calvin Klein marketing expenditures in the fourth quarter of 2017 as compared to previous guidance.

Revenue in 2017 is projected to increase approximately 7 percent or 6 percent on a constant currency basis compared to 2016. Negatively impacting revenue in 2017 as compared to 2016, the company said, is a reduction of approximately 150 million dollars due to the effects of the Mexico deconsolidation and the G-III license. Revenue for the Calvin Klein business is projected to increase approximately 9 percent or 7 percent on a constant currency basis), which includes the negative impact of the Mexico deconsolidation. Revenue for the Tommy Hilfiger business is projected to increase approximately 8 percent or 7 percent on a constant currency basis), which includes the negative impact of the G-III license. Revenue for the Heritage Brands business is projected to be flat compared to the prior year.

The Company expects its fourth quarter 2017 earnings per share results will be positively impacted compared to the fourth quarter of 2016 by approximately 0.02 dollar per share related to foreign currency exchange rates. Fourth quarter EPS on a GAAP basis is projected to be in a range of 1.35 dollars to 1.37 dollars compared to 1.26 dollars in the prior year period and EPS on a non-GAAP basis will be in a range of 1.42 to 1.44 dollars compared to 1.23 dollars in the prior year period.

Revenue in the quarter is projected to increase approximately 11 percent or 8 percent on a constant currency basis compared to the prior year period. PVH added that negatively impacting revenue in the fourth quarter of 2017 as compared to the prior year period is a reduction in revenue due to the effects of the Mexico deconsolidation, the G-III license, and a shift in the selling period in advance of the Chinese New Year, which occurs in the first quarter of 2018.

Revenue for the Calvin Klein business is projected to increase approximately 16 percent or 12 percent on a constant currency basis. Revenue for the Tommy Hilfiger business is projected to increase approximately 12 percent or 7 percent on a constant currency basis. Revenue for the Heritage Brands business in the fourth quarter is projected to decrease approximately 1 percent compared to the prior year.

Picture:PVH website