PVH Q2 revenues improve 2 percent, updates outlook

Earnings per share on a non-GAAP basis at PVH Corp were 1.37 dollars, inclusive of a 0.31 dollar negative impact primarily related to foreign currency exchange rates compared to the prior year. Earnings per share on a non-GAAP basis excluding the negative impact primarily related to foreign currency exchange rates was 1.68 dollars, or an increase of 11 percent. Revenue increased 2 percent on a constant currency basis and decreased 6 percent on a GAAP basis.

Commenting on these results, Emanuel Chirico, Chairman and Chief Executive Officer, noted, “Our second quarter performance highlighted continued strength in our Calvin Klein business, as consumers responded well to our recent product initiatives, particularly in underwear. Overall, our first half earnings per share, which increased 16 percent on a non-GAAP and constant currency basis, demonstrated our ability to deliver against our 2015 plan, while managing through the anticipated difficult global retail environment.”

Brands performed well on constant currency basis

Revenue in the Calvin Klein business for the quarter increased 3 percent on a constant currency basis and decreased 4 percent on a GAAP basis from 675 million dollars in the prior year’s second quarter. Calvin Klein North America revenue was flat on a constant currency basis and decreased 2 percent on a GAAP basis. North America retail comparable store sales increased 4 percent. The North America wholesale business experienced a moderate revenue decline.

Calvin Klein International revenue increased 7 percent on a constant currency basis decreased 6 percent on a GAAP basis compared to the prior year’s second quarter, with a 3percent increase in retail comparable store sales. The international revenue increase on a constant currency basis was driven by continued strength in Europe, combined with growth in China. Overall, the Calvin Klein Underwear business performed exceptionally well globally.

Revenue in the Tommy Hilfiger business for the quarter increased 5 percent on a constant currency basis, decreased 7 percent on a GAAP basis. Tommy Hilfiger North America revenue increased 3 percent on a constant currency basis and increased 1 percent on a GAAP basis. North America retail comparable store sales were relatively flat to the prior year’s second quarter.

Tommy Hilfiger International revenue increased 6 percent on a constant currency basis and decreased 13 percent on a GAAP basis from the prior year period. The increase on a constant currency basis was driven by solid performance in the European business, including a 9 percent increase in retail comparable store sales.

Revenue in the Heritage Brands business declined 6 percent driven in part by the prior year’s second quarter having the benefit of the sales attributable to the launch of IZOD at Kohl’s and a shift in the timing of wholesale shipments into the first quarter from the second quarter in the current year. Partially offsetting this decline was an 8 percent increase in retail comparable store sales in the Van Heusen business.

First half revenues in positive

Earnings per share on a non-GAAP basis for the first six months of 2015 was 2.87 dollars, inclusive of a 0.58 dollar negative impact primarily related to foreign currency exchange rates compared to the prior year period. Earnings per share on a non-GAAP basis excluding the negative impact primarily related to foreign currency exchange rates was 3.45 dollars, or an increase of 16 percent compared to earnings per share on a non-GAAP basis of 2.98 dollars in the prior year period. GAAP earnings per share were 2.59 dollars compared to 1.94 dollars in the prior year period. Revenue increased 3 percent on a constant currency basis and decreased 5 percent on a GAAP basis compared to 3.94 billion dollars in the prior year period.

The revenue change was due to a 4 percent increase on a constant currency basis or 3 percent decrease on a GAAP basis in the Calvin Klein business compared to the prior year period, primarily driven by strong performance in Europe, as well as in Asia, which included a benefit due to the Chinese New Year. International retail comparable store sales increased 6 percent. North America retail comparable store sales increased 2 percent despite the decreased traffic and spending trends in the company’s US stores located in international tourist locations as a result of the strengthening US dollar.

A 3 percent increase on a constant currency basis and 9 percent decrease on a GAAP basis in the Tommy Hilfiger business compared to the prior year period. Tommy Hilfiger North America revenue increased 1percent on a constant currency basis and decreased 1 percent on a GAAP basis inclusive of a 2 percent decrease in retail comparable store sales attributable to the decline in traffic and spending trends in the company’s US stores located in international tourist locations as a result of the strengthening US dollar. Tommy Hilfiger International revenue increased 4 percent on a constant currency basis and decreased 15 percent on a GAAP basis, driven principally by European retail comparable store sales growth of 6 percent and low-single digit percentage wholesale growth on a constant currency basis.

Revenue growth was also driven by relatively flat revenue in the Heritage Brands business compared to the prior year period, as an 11percent retail comparable store sales increase in the Van Heusen business was offset by the prior year’s second quarter having the benefit of the sales attributable to the launch of IZOD at Kohl’s.

Updates Q3 and full-year outlook

The company currently expects its full year earnings per share results to be negatively impacted versus the prior year by approximately 1.20 dollars per share from foreign currency exchange rates due to the significant strengthening of the US dollar against other currencies and volatility in the global macroeconomic environment, particularly with respect to the company’s businesses in Russia. The Company continues to expect a negative impact of approximately 0.10 dollar per share from its Russia businesses due to political and economic instability in the region.

Earnings per share for the full year 2015 is currently projected to be in a range of 6.90 dollars to 7 dollars. Excluding the negative impact, earnings per share on a non-GAAP basis is expected to increase 12 percent to 14 percent. Revenue in 2015 is currently projected to increase approximately 4 percent on a constant currency basis and decrease approximately 2 percent on a GAAP basis as compared to 2014.

The company currently expects its third quarter 2015 earnings per share results to be negatively impacted versus the prior year period by approximately 0.40 dollar per share primarily from foreign currency exchange rates. Third quarter earnings per share on a non-GAAP basis is currently projected to be in a range of 2.45 dollars to 2.50 dollars. Excluding negative impact, earnings per share on a non-GAAP basis is expected to increase 11 percent to 13 percent. Revenue is currently projected to increase approximately 3 percent on a constant currency basis and decrease approximately 3 percent on a GAAP basis.